Design of a liquid fuels supply model for U.S. policy analysis

Abstract

A strategic goal of highest priority for DOE's Fossil Energy Program is to reduce U.S. energy supply vulnerability to the economic and security implications of reliance upon scarce and increasingly expensive conventional petroleum resources, by developing the knowledge base for alternative supply technologies. To further the understanding of how explicit and implicit technological, economic and behavioral variables affect our capability to confidently develop options to deal with such fundamental policy issues which have long term consequences, the Division of Policy and Strategic Planning in the Office of Fossil Energy of the U.S. Department of Energy (DOE/FE) has sponsored the development of a comprehensive Liquid Fuels Supply (LFS) model. Particularly important features of this model include the disaggregation of the constituent liquid supply technologies, the extensive review and documentation of the data associated with the model, and the capability to treat explicitly the dynamics of investment decisions and technological change. The purpose of this paper is to call attention to the existence of this important new analytical tool, to provide a potential analyst with a reasonably complete description of its essential features, and to discuss the benchmarking completed and underway. Detailed network diagrams, process equations, and sources of data are given. Twelve depletable resource processes are represented. These include in situ and surface retorting of western oil shale, tar sands, western and eastern conventional onshore production, three types of enhanced oil recovery, eastern and western offshore recovery, and Alaskan onshore and offshore production. Details of the LFS model equations used to determine the equilibrium prices and quantities of liquid fuels are included. The fundamental data parameters which provide the computational basis for each supply technology are calculated from technology specific relationships between marginal cost and supply. LFS results are compared to projections of the National Energy Policy Plan. It is found that the LFS results generally fall within stated NEPP uncertainty ranges. A comprehensive sensitivity analysis capability, developed in conjunction with the LFS formulation, has been indispensible in identifying the differences in the calculated results. The Liquid Fuels Supply model described herein is also being integrated into a World Oil Model sponsored by the DOE Division of Energy Security and is being considered for application by the Energy Information Administration. With such a potentially large and important user community, the need for documentation and review in the open literature, as well as public availability, is considered essential.