EIA - World Oil Prices and Production Trends in AEO2009 Page | of 2 e ja) US. Energy Information Administration ons > act oss > el Ea tc ats > Wl Of rons ad Frinton Tans AEORO2 World Oil Prices and Production Trends in AEO2009 ‘The ol pees reported in AEQZO09 represent the price of light, lon-sulur crude of (h 2007 eolars[50L Projections of future supply ar demane’ are mace for “Tauidsa term usec fo refer te those fquds that ater processing are rering can be used intrcrargeably wih petoleum procuts, In AEO2009, igus indus convenional pevoleum Iauics—such as conventional rude ol ar'é natural gas plant liquds—in adgtion to unconvertoral lauds, such as botues, biumen, oaMlo-iguids (CTL), gasto-iguds (@7L), extacheavy ols, re shale cl [Developments in the werld ell market over the course of 2008 exempity how the level ane expected path of world ol prices can change even over a pari of ays, weeks, of months. he citicuy fr projecting prices ro the ture cortinues when the perio of intrest extends through 2080. Longterm wold ol pices ‘3 determined by ‘cur tundamertal ‘actos. mvesimert anc production gaisors by tre Organ zation o' the Pevoleum Exporing Gourtres (OPEC): the eoromics of non-OPEC conventcralIquids supply ne eeoronics of ureorvertoral igus supply. and wore denen for fous. Unoealry about longterm ‘werd ol praes can be considered nts of developments relate to ane or more ese factors. ‘Recent Market Trends ‘The frst 8 months of 2008 saw the continuation othe previous years increases in ll prices, spued by rising demars thet was saisieg by relatvaly high-cost ‘exploralon andl precuction rejects, sueh as these n Ulta deop waler ane of sarés, at ative when shortages In everyting fem sklled labor te steel were err up eat fever ie hale posuston pj A apart lack ct carta! epors io igh pres n seven cae, Chi ara ini 2 partoulat lea to expectations of corkuig Figh ol prces and the Bddhg Up o prises ‘or the puts needed fo evease supply. such as labor, ellng Figo, an Ether factors, Given the apparent lack ef consumer response to pros Inereases, lage My ireasing supply ana te Imtea evalaliy of igh cruce tls, some. analysts bellevec that a price o $200 per baal was plausible nthe near tem. By July 2008. when wold ol prices neared $150 per barel, had become apparect that petleum consumption inthe fst half ofthe year was lower than snicpated, anc that eccromie growth was sowng. August saw the begnring of the curert global crec crsis anc a further weakering 0! cemarc: are sre ‘September 2006, the global econeme dowium has reaucee consumers’ cltent and prospective near-term cemand foro whie a te same tie the gobal elt cre has rear etd th ably f some suppliers to ras eaptal fr projets to creas future producto tn he second hat of zo0e, producer anc consumer expectations regacing the mbalarce of supply and demand inthe word ll arkat were essentially fevers Before August, maikst expecaions fo he fare economy icicled that demand WOUlE oubpace Supply cespte planned increases in proguction capaety. Ater ‘September, expecatons became so csmal that OPEC's October 24 announcement ofa |.Sailionbare-percay procudion ct was folowed by a arop nl prices, [though the impacts ofthe current economic cowntur and erect eis cn petroleum demand are Ikely to be large i the neat term, ty also are Thaly to Be relatively shor-lved. National economies anc ol demand are expected to begin recovering in 2010. In contrast, ther impacts on cll preduction eapacty probably ‘ll ot Be ealzee unl the 2070-2018 pevcd, wher cumect naw vestments n eapacky, ad they bash mace would have Begun to rest mare ol prediction ‘Asa result ust atthe time wren demara 's expected tc recover, physical Imits on prodicton capacty cov lead to ancthor nave C pros Increases, na cycical pattern that's not nen tothe wor oil market Long-Term Prospects ‘Developments in past mons demonstrate how quickly ard drastically the fundamentals of cl proes and the worl Iquids market as a nhole can change. Win ‘amalter of merths, ho charge 7 curort and prospoctve world lauds gomara fas afecies the perceived neod for adlcnal acess te convertion resources, ‘and doveloprrent of urcorvertionalIquids supply and reversed OPEC production cecsions. The price paths assumec.r AEO2009 cover a road rango of Passe ‘tre scenaries for leuids production and ol prices, witha ctferenco of $150 per barrel (n real terms) botween the high and ow ol pice cases in 2000. [Rthough even tha large Terence by no means represents tre ull range 0! possblefvure ol poss, does allow EIA to analyze averety of scenarios fr Aue tonaitans in the ol ara energy markets m compar son wth the reference cas. Reference Case ‘The AEO2009 efererce case isa "businass a usual” Wend case bul on the assumption tha, or the United States, exstng ans, regulatlons, and practices wil be mairtange troughout the projector pera. The reereroe case assumes that ronth in the were economy as Iquce Gemard wil tecover By 2010, nth growth begnnng n 2010 and contnung tough 203, when wore demand for iqucs surpasses tre 2008 level. inthe orga term, worl economec growths ‘sumed tobe foughly constant, ana demas ‘or iquid rturss toa gradvaly mereasing longterm Wrens, As the Joba recession fades, pions (mreal 2007 Solars) bogn rebounding, to $110 per barrel 7 2018 and $150 per bare n 2030, Meeting the longtrm growth of wore iquds demand rogues higher cost suppis, particularly trom non-OPEC producers, as rected in the referonce case by 2 1.1 percent average annual noreaso 1 tho worl ol pres ator 2018. Inreases fem OPEC producers wil algo be rood, but the erganizaen ie assumed tO Tit is precucton growth so that ts share o” total word Tauiés supply romaine st approximatoly 40 porcert ‘The growth in non-OPEC production comes primal ftom inroasinly high-cost conventonal production projets in areas with Inconsistert fiscal or polticl regimes and from expensive uncorventonal exics producton projects. The ret to Pstricaly high pros levels woulc encowage the coninwaton of recent trends toware “esource natonalsm, with foregh rvestors having less access to prospecive arses, less atractve Vscal regimes, and higher exploration and rooveton costs than inthe rst ha of the docace. Low Price Case ‘Tne AEO2009 ow price case assumes tat ol pices remain at $50 per bare between 2015 ard 2020. The low prce case assumes that tee market compettion ‘and irtmational cooperation wil gus the development ct poltical ano ‘scl regs in both corsuming and produeng nator, ‘acting coorcnaton and ‘operation between them. Non-OPEC prosuere are expect to develop isal poles arg imestmert rgustons tal encourage private-sector partipaton In the development oftheir resources. OPEC is assured to increase fs producti leval, proving 50 pervert ofthe wofd's lauds ° AOSD. Te avalaDty of i cost rescurces in Doth non-OPEC and OPEG counves allows prices fo staize at relatvly low levels, $80 per bartel in veal 2007 colars an vectes the Iwww.eia.2ov/oiaf/aeo/otheranalysis/aeo_2009analvsispapers/woppt.htmlEIA - World Oil Prices and Production Trends in AEO2009 Page 2 of 2 Impetue for oneuming nations te vest in the production of ureenvertiona liquide as heavily ee nthe reference case, High Price Case ‘The AEOZC09 igh price ease assumes not ery that thors willbe areboune ino prices wth the retum oF word economic growth but sso that trey wil cortrus ‘scalaing rap ely a8 a resut oF larger restiions on corvertonal fu production. The rescions could aise from poltical decisions as wel as resource. Titatons, Valor producing court’es, both OPEC ard ron-OPEC, could use cuctas, fiscal regimes, and varous degrees of natonalzaton fo inerease thet atonal revenues fom ol pocution. in tat event, consuring countries probaly woul tum to Figh-cos! uncorventoral quis te meet some of thel domestic ‘emarc. AS aresul, nthe high price case, ol prices rise trcughout he projection pari, toa high ot $200 por barel in 2080. Demand for lquics s reduce by theligh of prices, bit the demand reducton's overshadowed by severe imitators on access to, ac avalality of, convent onal resouces. Components of Liqud Fuele Supply Inthe reference case, total liquic tues prosueton in 2080 is about 20 ition barels per cay higher than in 2007 (Table 5). Decsions by OPEC member counties sou rvesiments in new production capaci fer corvervonal lauds, along wth Imiatons on acoess to nor-OPEC conventional resources, it the increese in rodveton to 113 miler barrels per Gay ane ther share of eal abel levi fuels eupoly args om G6 percent In 2007 Ye BB percent in 2000. Global precuction of urcervertional petroleum fu ses in the reerenes case, Producton trom Verezuslas Cirece bat are Canada's ol sands increases butremans less than ' ecoremealy vable because of access rescters in Verezuda arc evirrertal corcesn Canaca. Asa resuR, uncorwert oral perleum Toues precuction Fteases by ory 3 6 miler barrels per cay. 6 percent ot eabal eu vas suppiy 2080, Raa wey Fgh poss also encour Gowtr ir prooulon cf Cf Gee, Betas, an aer ronpettieun dncarkentanal ce en elves suck wiharanals rg Comparer Ser Fretocarbans, ane eters) ton 17 millon brels por day in 2007 7.4 millon bartels por day (7 prcer o! eal aus suppl) in 2090, In the low pre ease, trom 205 10 2030, ol prices are on average almost 60 percert lower than inthe reference case. As described above, a lower price path ‘could be caused by ineeasec' access to resoutoes in on-OPEC courites ard Gec'sons by OPEC memrbercourires fo expard thelr proaucten. In thew price Case, comventora crude ol producton rises to 936 milion barrels per cay in 2090, the equN—aert ot 89 peroort of total liquids production In 2030 In the Fetorence case. Tota conventonal Iquls producton inthe low pice case rises above 100 millon barrels per Gay in 2028 ard continues upward to 106.1 milion barrels per day in 2080, Production of unconvertoral petroleum fui sas higher nthe low pre case than nthe reorence case, dospte ther goneraly high costs. The inexease is based cr assumed changes n access to resources. Inthe low price case, Venezuela's rocuetion of extia-heavy on 2000 rrereases to 3.0 millon barels por ay, compared wir 1-2 rillon Barrels per day nthe reference case—a 1SO-percert Increase that ore than cotpersates fora cecrease cf 0.5 min barrels pet day h proguetn irom Canasa’s of sane. As a result, tolal presualian of uneorvertionalpatelaum igus fh 2nc0 1-1 milfon barele pe cay Higher nthe low prea casa than inthe relerence case. Preduction of CTL, Gi. Detvels ane ether ungonvertional lauiss 12020 (pmarly ithe Units States, Chia, ns radi} 29 millon barat per cay loner than inthe rearence case, because the prota o suc" projects rece. she igh pce cate, tom 2015 0 2050 press average Se prcert moe than he lrnge cae been over recone on acess nor OPEC conventondl resourees and reductions n OPEC production. Conventional louse produeton 2020 le 71.0 milon bares pet day. doun by © millon barele per day from 2007 procution.Acooss Imfatons also corstan produston of Veneauslan extrasneavy cl whieh 2030 totals 0.8 millon Oars per Gay, or fillon bares per day las than inte Fteronce case, Production 0’ uncerwentenal ius rom Canada’s ol sanas n 2000's 0.9 milen barsls por day higher than nthe releans case, Ronever 5.1 milion Barals per cay 2080, wrich mer than makes Up fr fre decrease froductor 0 exra.heawy cl, Production of CTL, GTL, biotues, and other uncorventional iquds totale 2.5 millon barrels pee day more In 2000 in the high price ase than i the reference case, prmarly because Chra's CL production in 2000 's approxmately 0.8 millon bareke per Say more than f te reference case, and braat'e doles Prodtcton 6 1.0 mln barrels per day mare than inte reference case. nthe Unted States, QTL procuston stars in 2017 ane increases to 0.4 milion barrels Baer day n 2090 in tne high ol ree cace, 50. Appenelx table this rapt seo Include projection fr the average prices ofall grads of imports cruel Contact: Lauren Nayne Phone 202-586<3005, Ennai lutenmayne@eiadoe gov Iwww.eia.2ov/oiaf/aeo/otheranalysis/aeo_2009analvsispapers/woppt.html