John C. FelmyChief Economist and Director Statistics DepartmentAmerican Petroleum InstituteFelmyj@api.orgwww.api.orgwww.gasolineandyou.orgwww.naturalgasfacts.org: Petroleum and Natural Gas Situation John C. Felmy Chief Economist and Director Statistics Department American Petroleum Institute Felmyj@api.org www.api.org www.gasolineandyou.org www.naturalgasfacts.org


What is needed in a National Energy Policy?: What is needed in a National Energy Policy? Conservation and energy efficiency are important but are insufficient alone. Renewable energy is an important but small source of energy. Until it’s cost is reduced, it will continue to be a small source. Even with improved efficiency and more renewable energy, we will still need more conventional energy – oil, coal, natural gas and nuclear. Robustness, Redundancy and Diversity


Slide3: EIA Forecast of Winter Fuel Costs – October 2004


Slide4: NOAA Winter Outlook


Déjà vu, All Over Again: Déjà vu, All Over Again 2003 Early 2003 Cold winter Venezuela shutdown Nigerian strikes Iraq High crude oil prices California MTBE ban transition start Summer 2003 Blackout Pipeline problems Strong demand Japanese nuclear outages 2004 OPEC cuts Cold winter Japanese nuclear outages Venezuela uncertainty Iraq uncertainty Nigerian uncertainty Terrorist attacks Norwegian Strikes Yukos Strong economic growth Dollar depreciation High crude oil prices High natural gas prices Lower sulfur gasoline California finishes MTBE ban transition Mississippi river accident Refinery outages Strong gasoline demand NY/CT MTBE bans Hurricanes


Slide6: Crude oil futures prices - NYMEX


Slide7: Gasoline - Retail


Slide8: Gasoline and crude oil prices


Slide9: Crude oil and gasoline prices – from lows to highs


Slide10: Diesel and crude oil prices


Slide11: Natural gas prices have been above year ago levels


Slide12: NYMEX propane futures prices are at or near record levels


Slide13: NYMEX heating oil prices are at record levels


Slide14: NYMEX coal prices


Slide15: OPEC Capacity - EIA Table 3a. OPEC Oil Production (Thousand Barrels per Day) (Energy Information Administration\Short-Term Energy Outlook -- July 2004) Table 3a. OPEC Oil Production (Thousand Barrels per Day) (Energy Information Administration\Short-Term Energy Outlook -- July 2004)


Slide16: EIA Crude Oil Forecast Table 3a. OPEC Oil Production (Thousand Barrels per Day) (Energy Information Administration\Short-Term Energy Outlook -- July 2004) Table 3a. OPEC Oil Production (Thousand Barrels per Day) (Energy Information Administration\Short-Term Energy Outlook -- July 2004)


Slide17: EIA Natural Gas Forecast Table 3a. OPEC Oil Production (Thousand Barrels per Day) (Energy Information Administration\Short-Term Energy Outlook -- July 2004) Table 3a. OPEC Oil Production (Thousand Barrels per Day) (Energy Information Administration\Short-Term Energy Outlook -- July 2004)


Slide18: U.S. Energy Consumption Shares – 2003 - EIA


Slide19: U.S. Energy Consumption Shares – 2003 - EIA


Slide20: U.S. Energy Consumption Shares – 2003 - EIA


Slide21: U.S. Energy Consumption Shares – 2025 - EIA


Slide22: U.S. Residential Energy Consumption Shares – 2003 - EIA


Slide23: U.S. Industrial Energy Consumption Shares – 2003 - EIA


Slide24: U.S. Electricity Energy Consumption Shares – 2003 - EIA


Slide25: Transportation Fuel Shares – 2003 - EIA


Slide26: Petroleum Product Use Shares – 2003 - EIA


Slide27: Petroleum Product Usage – 2003 - EIA


Slide28: Petroleum Product Shares – 2003 - EIA


Slide29: Natural Gas Shares – 2003 - EIA


U.S. Energy Consumption – Quadrillion BtusAEO 2004 - EIA: U.S. Energy Consumption – Quadrillion Btus AEO 2004 - EIA


EIA Forecast to 2003 to 2025: EIA Forecast to 2003 to 2025 Real Gross Domestic Product is projected to increase by 92 percent Population is projected to increase by 19 percent Renewable energy supply is projected to increase by 50 percent Energy efficiency (output per unit of energy) is projected to improve by 27 percent Net petroleum imports are projected to increase, providing 70 percent of U.S. demand in 2025. Growth in petroleum demand is led by transportation, where efficiency improvements are more than offset by growing travel demand and petroleum’s market share increases slightly. Crude oil production falls by 19 percent. Imports of crude oil grow by 65 percent. Petroleum product imports increase by 80 percent. Refinery capacity expands from 16.8 to 21.8 million barrels per day Refinery utilization is projected to increase from 91 to 95 percent


World Energy Consumption – Quadrillion Btus - EIA: World Energy Consumption – Quadrillion Btus - EIA


World Energy Demand: World Energy Demand Total Energy Other Energy Solar & Wind Hydro Nuclear Biomass, MSW Solar & Wind Oil Gas Coal Other 1.7 1.2 2.9 1.8 Growth Rate 2000-2020, % Solar Wind MBDOE MBDOE MBDOE Growth Rate 2000-2020, % Growth Rate 2000-2020, % 1.3 0.2 2.4 14.0 10.4 Source: ExxonMobil


Forecast demand growth: Forecast demand growth ROW LA Other Asia Pacific OECD Source: ExxonMobil


Massive supply growth needed: Massive supply growth needed Source: ExxonMobil Non-OPEC Crude Undeveloped / Undiscovered NGL / Other Non-OPEC Crude Developed Non-OPEC Total 44 Non-OPEC Crude NGL/ Condensate Other OPEC Crude


World Oil Balance: 2000 - 2020: Latin America 3.5 2.0 FSU & Eastern Europe 3.1 6.8 Europe 7.2 10.6 Middle East Asia Pacific US/Canada 2000 2010 2020 Africa 5.3 8.1 Net Imports, MBD Net Exports, MBD 13.6 12.6 10.6 12.1 30.1 12.3 2000 2010 2020 8.8 7.2 2000 2010 2020 4.1 2000 2010 2020 2000 2010 2020 6.2 2000 2010 2020 2000 2010 2020 18.2 World Oil Balance: 2000 - 2020 21.8 34.5 27.2 18.5 Source: ExxonMobil


Technology: Technology Can be expected to adapt over several generations Markets work – they provide flexibility and discipline Attempts to replace oil prematurely are likely to be costly “Running out” is not likely


Developing additional supply will be challenging: Developing additional supply will be challenging Non-OPEC production shifting to new challenging frontiers Gulf OPEC needs to double capacity Capital needs are enormous


Policy: Policy Promotion of free investment and trade is essential Accurate depiction of impact of resource development is key Opposition to oil development is a serious threat


One Word: One Word Hydrates


Slide41: First – Do No Harm!


Slide42: Global Change – What is really happening?


History: History


Carbon vs Solar: Carbon vs Solar


Slide45: Second quarter 2004 industry profits were below average


Slide46: Industry profits in perspective


Slide47: Industry concentration