International Energy Module
The International Energy Module (IEM) performs two tasks in all NEMS runs.
First, the module reads exogenously global and U.S.A. petroleum liquids
supply and demand curves (1 curve per year; 2008-2030; approximated, isoelastic
fit to previous NEMS results). These quantities are not modeled directly
in NEMS. Previous versions of the IEM adjusted these quantities after
reading in initial values. In an attempt to more closely integrate the AEO2008 with IEO2007 and the STEO some functionality was removed from IEM
while a new algorithm was implemented. Based on the difference between
U.S. total petroleum liquids production (consumption) and the expected
U.S. total liquids production (consumption) at the current WTI price, curves
for global petroleum liquids consumption (production) were adjusted for
each year. According to previous operations, a new WTI price path was
generated. An exogenous oil supply module, Generate World Oil Balances
(GWOB), was also used in IEM to provide annual regional (country) level
production detail for conventional and unconventional liquids.
The second task of the IEM is to interact with the PMM module during runs
to determine changes in the WTI price and the supply prices of crude oils
and petroleum products for import to the United States in response to changes
in U.S. import requirements. As a result of the interaction with PMM,
this module also determines new values for oil production in the Middle
East OPEC region, along with a report for crude oil, light and heavy refined
products imports by source.
Key Assumptions
The level of oil production by countries in the Organization of Petroleum
Exporting Countries (OPEC) is a key factor influencing the world oil price
projections incorporated into AEO2008. Non-OPEC production, worldwide
regional economic growth rates and the associated regional demand for oil
are additional factors affecting the world oil price.
The world oil price is the annual average U.S. cost of imported low-sulfur
light crude oil in PADD2. For the low, reference, and high oil price cases,
prices reach $42, $70 and $118 per barrel in 2030, respectively, in 2006
dollars. The reference case assumes that OPEC producers will continue
to demonstrate a disciplined production approach. The low oil price case
reflects a market where all oil production becomes more competitive and
plentiful. The high oil price case could result from a more cohesive and
market-assertive OPEC whose long-term goal might be to maintain a constant
market share. The three price scenarios are shown in Figure 2.
OPEC oil production is assumed to increase throughout the reference case
projection, making OPEC the primary source for satisfying the worldwide
increase in oil consumption expected over the projection period (Figure
3). OPEC is assumed to be the source of additional production because
its member nations hold a major portion of the world’s total reserves—exceeding
927 billion barrels, about 70 percent of the world’s estimated total, at
the end of 2006.1
The reference case values for OPEC production are shown in Figure 3. Ecuador
is not included in OPEC in AEO2008 because of the late announcement. Iraq
oil production is assumed to not return to pre-conflict volumes until 2010.
By 2030, Iraq is expected to increase production capacity to more than
4.6 million barrels per day with likely investment help from foreign sources.
Non-OPEC liquids production is expected to increase by 1.1 percent per
year over the projection period, as advances in both exploration and extraction
technologies result in an upward trend. The non-OPEC production path for
the reference case is shown in Figure 4.
The non-U.S. oil production projections in the AEO2008 begin with country-level
assumptions regarding oil resources. These resource estimates are taken
in part from the USGS World Petroleum Assessment of 2000 as well as from
PennWell Publishing Company Oil and Gas Journal, summary of which is shown
in Table 4.
The reference case growth rates for GDP for various regions in the world
are shown in Table 5. Except for the United States, the GDP growth rate
assumptions for non U.S. country/regions are taken from IEO2007.
The values for growth in oil demand in the International Energy Module,
which depend upon the oil price levels as well as GDP growth rates, are
shown in Table 6 for the reference case by regions.
Petroleum products imports are represented in the projections through a
series of curves for each of the five Petroleum Administration for Defense
Districts (PADDs). Curves are provided for seventeen products: traditional
gasoline (including aviation), reformulated gasoline, conventional and
reformulated gasoline blending stocks for oxygenated blending (CBOB, RBOB),
traditional distillate fuel, low-sulfur heating oil, ultra low-sulfur diesel
fuel, high and low-sulfur residual fuel, jet fuel (including naphtha jet),
liquefied petroleum gases, petrochemical feedstocks, unfinished oils (resid,
naphtha, heavy gas oil), methanol, MTBE, and other petroleum products.
The curves are derived from AEO2007 curves and analysis of price differential
between marker crude oils and refined petroleum productions imported into
the U.S.
[1] PennWell Corporation, Oil and Gas Journal, Vol. 103, No. 47 (December
19, 2005). |
