The International Energy Module determines changes in the world oil 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. A
market clearing method is used to determine the price at which worldwide
demand for oil is equal to the worldwide supply. The module determines
new values for oil production and demand for regions outside the United
States, along with a new world oil price that balances supply and demand
in the international oil market. A detailed description of the International
Energy Module is provided in the EIA publication, Model Documentation Report: The
International Energy Module of the National Energy Modeling System, DOE/EIA-M071(06),
(Washington, DC, February 2006).
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 AEO2006. 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. refiner's acquisition cost
of imported crude oil. Three distinct world oil price scenarios are represented
in AEO2006, the low, reference, and high price cases. For the low, reference,
and high oil price cases, prices reach $28, $50 and $90 per barrel in 2030,
respectively, in 2004 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
forecast, making OPEC the primary source for satisfying the worldwide increase
in oil consumption expected over the forecast 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 902 billion
barrels, over 70 percent of the world’s estimated total, at the end of
2005.4 The reference case values for OPEC production are shown in Figure
3. Iraq is assumed to sell oil at approximately pre-conflict volumes
until 2005. They are expected to increase production levels to over 3.5
million barrels per day by the end of the decade. By 2030, Iraq is expected
to increase production capacity to more than 6 million barrels per day
with likely investment help from foreign sources. Non-OPEC oil production
is expected to increase by almost 1.3 percent per year over the forecast
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 forecasts in the AEO2006 begin with country-level
assumptions regarding proved oil reserves. These reserve estimates are
taken from PennWell Publishing Company’s Oil and Gas Journal and are shown
in Table 4.
The assumed growth rates for GDP for various regions in the world are shown
in Table 5. The same GDP growth rates are applied in all three world oil
price cases. The GDP growth rate assumptions are from Global Insight’s
DRI-WEFA August 2004 World Economic Outlook.
The values for growth in oil demand calculated in the International Energy
Module, which depend upon the oil price levels as well as the GDP growth
rates, are shown in Table 6 for the reference case by regions.
Petroleum product imports are represented in the projections through a
series of curves that present the quantity of each product that the world
market is willing to supply to U.S. markets for each of the five Petroleum
Administration for Defense Districts (PADDs). Curves are provided for twelve
products: traditional gasoline (including aviation), reformulated gasoline,
reformulated gasoline blending stocks for oxygenated blending (RBOB), traditional
distillate fuel, low-sulfur No. 2 heating oil, low-sulfur diesel fuel,
high- and low-sulfur residual fuel, jet fuel (including naphtha jet), liquefied
petroleum gases, petrochemical feedstocks, and other petroleum products.
The curves are calculated using the World Oil Refining Logistics Demand (WORLD) Model.5 The WORLD model uses as inputs worldwide demand
for crude oil and petroleum products based on world oil prices that are
close to the oil prices assumed for AEO2006, as well as values for worldwide
petroleum production that are consistent with such prices. The refinery
technology incorporated in the model is updated using the most recently
available Oil & Gas Journal Database.6
International Tables
International Notes |
