Preface

The Annual Energy Outlook 2012 (AEO2012), prepared by the U.S. Energy Information Administration (EIA), presents long-term projections of energy supply, demand, and prices through 2035, based on results from EIA's National Energy Modeling System (NEMS). EIA published an "early release" version of the AEO2012 Reference case in January 2012.

The report begins with an "Executive summary" that highlights key aspects of the projections. It is followed by a "Legislation and regulations" section that discusses evolving legislative and regulatory issues, including a summary of recently enacted legislation and regulations, such as: the Mercury and Air Toxics Standards (MATS) issued by the U.S. Environmental Protection Agency (EPA) in December 2011 [1] the Cross-State Air Pollution Rule (CSAPR) as finalized by the EPA in July 2011 [2]; the new fuel efficiency standards for medium- and heavy-duty vehicles published by the EPA and the National Highway Traffic Safety Administration (NHTSA) in September 2011 [3]; and regulations pertaining to the power sector in California Assembly Bill 32 (AB 32), the Global Warming Solutions Act of 2006 [4].

The "Issues in focus" section contains discussions of selected energy topics, including a discussion of the results in two cases that adopt different assumptions about the future course of existing policies: one case assumes the extension of a selected group of existing public policies—corporate average fuel economy (CAFE) standards, appliance standards, production tax credits, and the elimination of sunset provisions in existing energy policies; the other case assumes only the elimination of sunset provisions. Other discussions include: oil price and production trends in the AEO2012; potential efficiency improvements and their impacts on end-use energy demand; energy impacts of proposed CAFE standards for light-duty vehicles (LDVs), model years (MYs) 2017 to 2025; impacts of a breakthrough in battery vehicle technology; heavy-duty (HD) natural gas vehicles (NGVs); changing structure of the refining industry; changing environment for fuel use in electricity generation; nuclear power in AEO2012; potential impact of minimum pipeline throughput constraints on Alaska North Slope oil production; U.S. crude oil and natural gas resource uncertainty; and evolving Marcellus shale gas resource estimates.

The "Market trends" section summarizes the projections for energy markets. The analysis in AEO2012 focuses primarily on a Reference case, Low and High Economic Growth cases, and Low and High Oil Price cases. Results from a number of other alternative cases also are presented, illustrating uncertainties associated with the Reference case projections for energy demand, supply, and prices. Complete tables for the five primary cases are provided in Appendixes A through C. Major results from many of the alternative cases are provided in Appendix D. Complete tables for all the alternative cases are available on EIA's website in a table browser at www.eia.gov/oiaf/aeo/tablebrowser.

AEO2012 projections are based generally on Federal, State, and local laws and regulations in effect as of the end of December 2011. The potential impacts of pending or proposed legislation, regulations, and standards (and sections of existing legislation that require implementing regulations or funds that have not been appropriated) are not reflected in the projections. In certain situations, however, where it is clear that a law or regulation will take effect shortly after the AEO is completed, it may be considered in the projection.

AEO2012 is published in accordance with Section 205c of the U.S. Department of Energy (DOE) Organization Act of 1977 (Public Law 95-91), which requires the EIA Administrator to prepare annual reports on trends and projections for energy use and supply.

Projections by EIA are not statements of what will happen but of what might happen, given the assumptions and methodologies used for any particular scenario. The Reference case projection is a business-as-usual trend estimate, given known technology and technological and demographic trends. EIA explores the impacts of alternative assumptions in other scenarios with different macroeconomic growth rates, world oil prices, and rates of technology progress. The main cases in AEO2012 generally assume that current laws and regulations are maintained throughout the projections. Thus, the
projections provide policy-neutral baselines that can be used to analyze policy initiatives.

While energy markets are complex, energy models are simplified representations of energy production and consumption, regulations, and producer and consumer behavior. Projections are highly dependent on the data, methodologies, model structures, and assumptions used in their development. Behavioral characteristics are indicative of real-world tendencies rather than representations of specific outcomes.

Energy market projections are subject to much uncertainty. Many of the events that shape energy markets are random and cannot be anticipated. In addition, future developments in technologies, demographics, and resources cannot be foreseen with certainty. Many key uncertainties in the AEO2012 projections are addressed through alternative cases.

EIA has endeavored to make these projections as objective, reliable, and useful as possible; however, they should serve as an adjunct to, not a substitute for, a complete and focused analysis of public policy initiatives.

Endnotes for Preface

1. U.S. Environmental Protection Agency, "Mercury and Air Toxics Standards," website www.epa.gov/mats.
2. U.S. Environmental Protection Agency, "Cross-State Air Pollution Rule (CSAPR)," website epa.gov/airtransport.
3. U.S. Environmental Protection Agency and National Highway Traffic Safety Administration, "Greenhouse Gas Emissions Standards and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles; Final Rule," Federal Register, Vol. 76, No. 179 (September 15, 2011), pp. 57106-57513, website www.gpo.gov/fdsys/pkg/FR-2011-09-15/html/2011-20740.htm.
4. California Environmental Protection Agency, Air Resources Board, "Assembly Bill 32: Global Warming Solutions Act of 2006," website www.arb.ca.gov/cc/ab32/ab32.htm.