‹ Analysis & Projections

Annual Energy Outlook 2016

Full Release Date: End of August 2016 

Energy consumption by primary fuel

Total primary energy consumption grows in the AEO2015 Reference case by 8.6 quadrillion Btu (8.9%), from 97.1 quadrillion Btu in 2013 to 105.7 quadrillion Btu in 2040 (Figure 18). Most of the growth is in consumption of natural gas and renewable energy. Consumption of petroleum products across all sectors in 2040 is unchanged from 2013 levels, as motor gasoline consumption in the transportation sector declines as a result of a 70% increase in the average efficiency of on-road light-duty vehicles (LDVs), to 37 mpg in 2040, which more than offsets projected growth in vehicle miles traveled (VMT). Total motor gasoline consumption in the transportation sector is about 3.4 quadrillion Btu (1.8 million barrels per day (bbl/d)) lower in 2040 than in 2013, and total petroleum consumption in the transportation sector is about 1.6 quadrillion Btu (0.9 million bbl/d) lower in 2040 than in 2013.


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U.S. consumption of petroleum and other liquids, which totaled 35.9 quadrillion Btu (19.0 million bbl/d) in 2013, increases to 37.1 quadrillion Btu (19.6 million bbl/d) in 2020, then declines to 36.2 quadrillion Btu (19.3 million bbl/d) in 2040. In the transportation sector, which continues to dominate demand for petroleum and other liquids, there is a shift from motor gasoline to distillate. The gasoline share of total demand for transportation petroleum and other liquids declines by 10.6 percentage points, while distillate consumption increases by 7.2 percentage points. Increased use of compressed natural gas and LNG in vehicles also replaces about 3% of petroleum and other liquids consumption in the transportation sector in 2040. Consumption of ethane and propane (the latter including propylene), which are used in chemical production, shows the largest increase of all petroleum products in the AEO2015 Reference case from 2013 to 2040. Industrial consumption of ethane and propane, extracted from wet gas in natural gas processing plants, grows by almost 1 quadrillion Btu (790 thousand bbl/d) as dry natural gas production increases.

Natural gas consumption in the AEO2015 Reference case increases from 26.9 quadrillion Btu (26.2 Tcf) in 2013 to 30.5 quadrillion Btu (29.7 Tcf) in 2040. The largest share of the growth is for electricity generation in the electric power sector, where demand for natural gas grows from 8.4 quadrillion Btu (8.2 Tcf) in 2013 to 9.6 quadrillion Btu (9.4 Tcf) in 2040, in part as a result of the retirement of 40.1 GW of coal-fired capacity by 2025. Natural gas consumption in the industrial sector also increases, rapidly through 2016 and then more slowly through 2040, benefiting from the increase in shale gas production that is accompanied by slower growth of natural gas prices. Industries such as bulk chemicals, which use natural gas as a feedstock, are more strongly affected than others. Natural gas use as a feedstock in the chemical industry increases by about 0.4 quadrillion Btu from 2013 to 2040. In the residential sector, natural gas consumption declines from 2018 to 2040 and it increases slightly in the commercial sector over the same period.

Coal use in the Reference case grows from 18.0 quadrillion Btu (925 million short tons) in 2013 to 19.0 quadrillion Btu (988 million short tons) in 2040. As previously noted, the Reference case and other AEO2015 cases do not include EPA’s proposed Clean Power Plan, which if it is implemented is likely to have a significant effect on coal use. Coal use in the industrial sector falls off slightly over the projection period, as steel production becomes more energy efficient. On the other hand, if oil prices were significantly higher than projected in the Reference case, coal could be used to make liquids via the Fischer-Tropsch process. In the High Oil Price case—the only AEO2015 case in which coal-to-liquids (CTL) technology becomes economically viable—liquids production from CTL plants totals about 710,000 bbl/d in 2040, representing about 3.3 quadrillion Btu (including liquids value), or about 180 million short tons, of coal consumption.

Consumption of marketed renewable energy increases by about 3.6 quadrillion Btu in the Reference case, from 9.0 quadrillion Btu in 2013 to 12.5 quadrillion Btu in 2040, with most of the growth in the electric power sector. Hydropower, the largest category of renewable electricity generation in 2013, contributes little to the increase in renewable fuel consumption. Wind-powered generation, the second-largest category of renewable electricity generation in 2013, becomes the largest contributor in 2038 (including wind generation by utilities and end-users onsite). However, solar photovoltaics (6.8%/year), geothermal (5.5%/ year), and biomass (3.1%/year) all increase at faster average annual rates than wind (2.4%/year), including all sectors. Modest penetration of E85 and a small increase in liquids blended into diesel fuel result in a slight increase in consumption of renewable liquid fuels for transportation, despite a smaller pool for ethanol blending as a result of a projected overall decrease in motor gasoline consumption in the AEO2015 Reference case.

In the High Oil Price case, total primary energy use in 2040 is 109.7 quadrillion Btu, 3.9 quadrillion Btu higher than in the Reference case, even though total liquids consumption in 2040 is 3.3 quadrillion Btu lower, despite an 0.3 quadrillion Btu increase in renewable liquids. The decrease in petroleum and other liquids consumption is more than offset by increased consumption of natural gas (31.8 quadrillion Btu in 2040, 1.3 quadrillion Btu more than in the Reference case), coal (21.6 quadrillion Btu in 2040, 2.6 quadrillion Btu more, not including the Fischer-Tropsch coal consumed as liquids), nuclear (9.8 quadrillion Btu in 2040, 1.1 quadrillion Btu more), and many renewables (13.2 quadrillion Btu in 2040, 2.3 quadrillion Btu more, not including consumption of liquids from renewable fuels). The increases in coal and natural gas consumption are explained by the attractiveness of turning them into liquid fuels, made profitable by higher oil prices despite lower demand for motor gasoline and diesel fuels.

Uncertainty about economic growth results in the widest variation in the projections for total primary energy consumption in 2040, ranging from 98.0 quadrillion Btu in the Low Economic Growth case (1.8% average annual growth in real GDP measured in 2009 dollars) to 116.2 quadrillion Btu in the High Economic Growth case (2.9% average annual growth in real GDP). Changes in the assumed rate of economic growth lead to variations in the growth of energy consumption across all fuels, whereas changes in crude oil prices or in the size of the oil and natural gas resource base result in shifts among the fuel types consumed, with some fuels gaining share and others losing share. In the Low Oil Price case, the petroleum and other liquids share of total energy consumption is about 36.4% in 2040; in the High Oil Price case, it is 30.0% in the same year. With cheaper natural gas in the High Oil and Gas Resource case, less electricity is generated from coal and renewable fuels.