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Last Updated: January 6, 2017
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EIA’s Annual Energy Outlook 2017 (AEO2017), released this morning presents updated projections for U.S. energy markets. This AEO is the first to have projections through 2050 in the AEO tables.

The United States becomes a net energy exporter in most AEO2017 cases as petroleum liquid imports fall and natural gas exports rise. Exports are highest, and grow throughout the projection period, in the High Oil and Gas Resource and Technology case, because favorable geology and technological developments result in the production of oil and natural gas at lower costs.

The High Oil Price case provides favorable economic conditions for crude oil and natural gas producers while restraining domestic consumption, enabling the most rapid transition to net exporter status. In all cases but the High Oil and Gas Resource Technology case, which assumes substantial improvements in production technology and more favorable resource availability, U.S. energy production declines in the 2030s, which slows or reverses projected growth in net energy exports.

The eight cases considered in AEO2017 incorporate different assumptions that reflect market, technology, resource, and policy uncertainties that affect energy markets. Other key findings include

Energy consumption is consistent across all AEO cases, bounded by the High and Low Economic Growth cases. In the Reference case, total energy consumption increases 5% between 2016 and 2040. Because a significant portion of energy consumption is related to economic activity, energy consumption is projected to increase by approximately 11% from 2016 to 2040 in the High Economic Growth case and remain nearly flat in the Low Economic Growth Case. In all AEO cases, the electric power sector remains the largest consumer of primary energy.

Energy production ranges from nearly flat in the Low Oil and Gas Resource and Technology case to growth of nearly 50% over 2016–40 in the High Oil and Gas Resource and Technology Case. Unlike energy consumption, which varies less across AEO cases, projections of energy production vary widely. Production growth is dependent on technology, resource, and market conditions. Total energy production increases by more than 20% in the Reference case from 2016 through 2040, led by increases in crude oil and natural gas production.

Energy related carbon dioxide emissions decline in most AEO cases, with the highest emissions projected in the No Clean Power Plan case. All AEO2017 cases except the No Clean Power Plan case assume the Clean Power Plan is implemented.

To better focus EIA’s resources on expanding its understanding of rapidly evolving energy markets and to better represent new information in EIA’s models and publications, EIA has adopted a two-year release cycle for the AEO. Like AEO2015, AEO2017 is a shorter edition of the AEO. A full edition of the AEO, including Issues in Focus articles, in-depth updates on changes in Legislation and Regulations, and a larger set of side cases with browser tables and spreadsheets for all cases is produced every second year.

In years between the full editions, a shorter edition provides a smaller number of cases summarized in annotated presentation slides with the standard set of AEO browser tables and spreadsheets containing the detailed modeling results. EIA will continue to update and refine the market dynamics and technologies in future AEOs, especially for the projections between 2040 and 2050. Projections from the AEO2017 Reference and alternative cases are available on the Annual Energy Outlook website.


Principal contributor: EIA Staff

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May, 24 2022
Where to buy your Gun Parts from?

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May, 20 2022
High Oil Prices and Indonesia’s Ban on Oil Palm Exports

Supply chains are currently in crisis. They have been for a long time now, ever since the start of the Covid-19 pandemic reshaped the way the world works. Stressed shipping networks and operational blockages – coupled with China’s insistence on a Covid-zero policy – means that cargo tanker rates are at an all-time high and that there just aren’t enough of them. McDonalds and KFCs in Asia are running out of French fries to sell, not because there aren’t enough potatoes in Idaho, but because there aren’t enough ships to deliver them to Japan or to Singapore from Los Angeles. The war in Ukraine has placed a particular emphasis on food supply chains by disrupting global wheat and sunflower oil supply chains and kicking off distressingly high levels of food price inflation across North Africa, the Middle East and Asia. It was against this backdrop that Indonesia announced a complete ban on palm oil exports. That nuclear option shocked the markets, set off a potential new supply chain crisis and has particular implications on future of crude oil pricing and biofuels in Asia.  

A brief recap. Like most of Asia, Indonesia has been grappling with food price inflation as consequence of Covid-19. Like most of Asia, Indonesia has been attempting to control this through a combination of shielding its most vulnerable citizens through continued subsidies while attempting to optimise supply chains. Like most of Asia, Indonesia hasn’t been to control the market at all, because uncoordinated attempts across a wide spectrum of countries to achieve a similar level of individual protectionism is self-defeating.

Cooking oil is a major product of sensitive importance in Indonesia, and one that it is self-sufficient in as a result of its status as the world’s largest palm oil producer. So large is Indonesia in that regard that its excess palm oil production has been directed to increasingly higher biodiesel mandates, with a B40 mandate – diesel containing 40% of palm material – originally schedule for full implementation this year. But as palm oil prices started rising to all-time highs at the beginning of January, cooking oil started becoming scarcer in Indonesia. The government blamed hoarding and – wary of the Ramadan period and domestic unrest – implemented a Domestic Market Obligation on palm oil refineries, directing them to devote 20% of projected exports for domestic use. Increasingly stricter terms for the DMO continued over February and March, only for an abrupt U-turn in mid-March that removed the DMO completely. But as the war in Ukraine drove prices even further, Indonesia shocked the market by announcing an total ban on palm oil exports in late April. Chaotically, the ban was first clarified to be palm olein only (straight refining cooking oil), but then flip-flopped into a total ban of crude palm oil as well. Markets went haywire, prices jumped to historical highs and Indonesia’s trading partners reacted with alarm.

Joko Widodo has said that the ban will be indefinite until domestic cooking oil prices ‘moderate’. With the global situation as it is, ‘moderate’ is unlikely to be achieved until the end of 2022 at least, if ‘moderate’ is taken to be the previous level of palm oil prices – roughly half of current pricing. Logistically, Indonesia cannot hold out on the ban for more than two months. Only a third of Indonesia’s monthly palm oil production is consumed domestically; the rest is exported. An indefinite ban means that not only fill storage tanks up beyond capacity and estates forced to let fruit rot, but Indonesia will be missing out on crucial revenue from its crude palm oil export tax. Which is used to fund its biodiesel subsidies.

And that’s where the implications on oil come in. Indonesia’s ham-fisted attempt at protectionism has dire implications on biofuels policies in Asia. Palm oil prices within Indonesia might sink as long as surplus volumes can’t make it beyond the borders, but international palm oil prices will remain high as consuming countries pivot to producers like Malaysia, Thailand, Papua New Guinea, West Africa and Latin America. That in turn, threatens the biodiesel mandates in Thailand and Malaysia. The Thai government has already expressed concern over palm-led food price inflation and associated pressure on its (subsidised) biodiesel programme, launching efforts to mitigate the worst effects. Malaysia – which has a more direct approach to subsidised fuels – is also feeling the pinch. Thailand’s move to B10 and Malaysia’s move to B20 is now in jeopardy; in fact, Thailand has regressed its national mandate from B7 to B5. And the reason is that the differential between the bio- and the diesel portion of the biodiesel is now so disparate that subsidy regimes break down. It would be far cheaper – for the government, the tax-payers and consumers – to use straight diesel instead of biodiesel, as evidenced by Thailand’s reversal in mandates.

That, in turn, has implications on crude pricing. While OPEC+ is stubbornly sticking to its gentle approach to managing global crude supply, the stunning rebound in Asian demand has already kept the consumption side tight to match that supply. Crude prices above US$100/b are a recipe for demand destruction, and Asian economies have been preparing for this by looking at alternatives; biofuels for example. In the past four years, Indonesia has converted some of its oil refineries into biodiesel plants; in China, stricter crude import quotas are paving the way for China to clamp down on its status of a fuels exporter in favour of self-sustainability. But what happens when crude prices are high, but the prices of alternatives are higher? That is the case for palm oil now, where the gasoil-palm spread is now triple the previous average.

Part of this situation is due to market dynamics. Part of it is due to geopolitical effects. But part of it is also due to Indonesia’s knee-jerk reaction. Supply disruption at the level of a blanket ban is always seismic and kicks off a chain of unintended consequences; see the OPEC oil shocks of the 70s. Indonesia’s palm oil export ban is almost at that level. ‘Indefinite’ is a vague term and offers no consolation to markets looking for direction. Damage will be done, even if the ban lasts a month. But the longer it lasts – Indonesian general elections are due in February 2024 – the more serious the consequences could be. And the more the oil and refining industry in Asia will have to think about their preconceived notions of the future of oil in the region.

End of Article

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Market Outlook:

  • Crude price trading range: Brent – US$110-1113/b, WTI – US$105-110/b
  • As the war in Ukraine becomes increasingly entrenched, the pressure on global crude prices as Russian energy exports remain curtailed; OPEC+ is offering little hope to consumers of displaced Russian crude, with no indication that it is ready to drastically increase supply beyond its current gentle approach
  • In the US, the so-called NOPEC bill is moving ahead, paving the way for the US to sue the OPEC+ group under antitrust rules for market manipulation, setting up a tense next few months as international geopolitics and trade relations are re-evaluated

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