Energy projections to the year 2010: a technical report in support of the National Energy Policy Plan

Abstract

Underlying these energy projections are assumptions and results about key variables - world oil prices, economic growth, energy consumption, and production potential - which are described in this document. The projections are based on information available through June 1983. Projecting US energy supply, demand, and prices through the year 2010 is by nature a highly uncertain process. These projections try to account for uncertainty by providing a variety of scenarios that account for alternative future conditions. Results indicate that although the outlook for future world oil prices is highly uncertain, most analysts now agree that, barring a significant oil supply disruption, world oil prices will most likely fall in real terms until the mid 1980's. From 1985 to 1990, prices will most likely increase in real terms. Beyond 1990, the outlook becomes increasingly uncertain. The oil price increases of 1973 to 1974 and 1979 to 1980 have set into motion powerful energy conservation forces that are likely to continue causing energy (especially oil) to be used more efficiently. Consequently, we need to pay continuing attention to analyzing and evaluating energy conservation trends in world economies. The recent decline in world oil prices has added a new dimension to the uncertainty about future market conditions. Prior to 1983, OPEC had never officially reduced the posted price of oil, but rather used the influence of inflation to allow prices to fall gradually in real terms during periods of excess world supply. Now, investment planners must not only be concerned about the potential for oil price shocks, which can send the oil price very high, but also about future price breaks which could send the price very low. Under all but extreme assumptions, both the US and the rest of the world will remain dependent on liquid fuels, including oil supplies from OPEC, throughout at least the next 20 years. 73 references.