‹ Analysis & Projections

AEO2011 Early Release Overview

Release Date: December 16, 2011   |  Next Release Date: January 2012  |   Report Number: DOE/EIA-0383ER(2011)

Energy Prices

Crude Oil

Figure Data
World oil prices declined sharply in the second half of 2008 from their peak in mid-July of that year. Real prices trended upward throughout 2009, and through November 2010 they remained generally in a range between $70 and $85 per barrel. Prices continue to rise gradually in the Reference case (Figure 4), as the world economy recovers and global demand grows more rapidly than liquids supplies from producers outside the Organization of the Petroleum Exporting Countries (OPEC). In 2035, the average real price of crude oil in the Reference case is $125 per barrel in 2009 dollars, or about $200 per barrel in nominal dollars.

The AEO2011 Reference case assumes that limitations on access to energy resources restrain the growth of non-OPEC conventional liquids production between 2009 and 2035, and that OPEC targets a relatively constant market share of total world liquids production. The degree to which non-OPEC countries and countries outside the Organization for Economic Cooperation and Development (OECD) restrict access to potentially productive resources contributes to world oil price uncertainty. Other factors causing uncertainty include OPEC investment decisions, which will affect future world oil prices and the economic viability of unconventional liquids. A wide range of price scenarios and discussion of the significant uncertainty surrounding future world oil prices will be included in the complete AEO2011 publication when it is released in the spring of 2011.

Figure Data
The AEO2011 Reference case also includes signifi cant long-term potential for supply from non-OPEC producers. In several resource-rich regions (including Brazil, Russia, and Kazakhstan), high oil prices, expanded infrastructure, and further investment in exploration and drilling contribute to additional non-OPEC oil production (Figure 5). Also, with the economic viability of Canada's oil sands supported by rising world oil prices and advances in production technology, Canadian oil sands production reaches 5.1 million barrels per day in 2035.

Liquid Products

Real prices (in 2009 dollars) for motor gasoline and diesel in the AEO2011 Reference case increase from $2.35 and $2.44 per gallon, respectively, in 2009 to $3.69 and $3.89 per gallon in 2035, lower than in the AEO2010 Reference case. Annual average diesel prices are higher than gasoline prices throughout the projection because of stronger growth in demand for diesel than for motor gasoline.

Retail prices for E85 (a blend of 70 to 85 percent ethanol and 30 to 15 percent gasoline by volume) are projected to shift from a volumetric basis to an energy-equivalent basis relative to motor gasoline, in order to meet the renewable fuels standard (RFS) legislated in the Energy Independence and Security Act of 2007 (EISA2007). In 2022, the retail price of gasoline is $3.43 per gallon while the price of E85 is $2.68 per gallon, refl ecting the higher energy content of gasoline versus E85 and delivering a similar cost for the two fuels per mile traveled.

Natural Gas

Because of a revised representation of natural gas pricing and a significant increase in estimated technically recoverable shale gas resources, the price of natural gas at the wellhead is consistently lower in the AEO2011 Reference case than it was in AEO2010.

The annual average natural gas wellhead price remains under $5 per thousand cubic feet through 2022, but it increases thereafter because signifi cantly more shale wells must be drilled to meet growth in natural gas demand and off set declines in natural gas production from other sources. As the shale gas resource base is developed, production gradually shifts to resources that are somewhat less productive and more expensive to produce. Natural gas wellhead prices (in 2009 dollars) reach $6.53 per thousand cubic feet in 2035, compared with $8.19 in AEO2010.


After peaking in 2010, the average U.S. minemouth coal price declines gradually as higher cost coal from mines in Appalachia, particularly Central Appalachia, is displaced with lower cost coal from other U.S. coal basins. After 2016, a leveling off in Appalachian coal production combined with growth in coal demand results in a gradual rise in coal prices through 2035. The Appalachian share of total coal production, on a Btu basis, declines from 40 percent in 2009 to 33 percent in 2016 and 29 percent in 2035. Throughout the entire projection period, the average U.S. coal price in the AEO2011 Reference case remains above the prices projected in the AEO2010 Reference case.

In the AEO2011 Reference case, average real minemouth coal prices in 2009 dollars increase from $1.67 per million Btu ($33.26 per short ton) in 2009 to $1.79 per million Btu ($36.40 per short ton) in 2010, then decline to $1.62 per million Btu ($32.44 per short ton) in 2016 as demand for higher priced coal from Central Appalachia shifts to less expensive coal from other U.S. coal basins. A leveling off of Central Appalachian coal production, combined with increasing demand for coal, leads to a gradual increase in minemouth coal prices to $1.73 per million Btu ($34.11 per short ton) in 2035.


Following the recent rapid decline of natural gas prices, real average delivered electricity prices in the AEO2011 Reference case fall from 9.8 cents per kilowatthour in 2009 to as low as 8.9 cents per kilowatthour in 2016 as natural gas prices remain relatively low.

Electricity prices tend to reflect trends in fuel prices—particularly, natural gas prices, because natural gas represents a large share of total fuel costs, and in competitive areas natural gas-fi red plants often are the marginal generators. There can be lags in the timing of price impacts, however, because fuel price contracts may aff ect the fuel costs passed through to electricity consumers.

In the AEO2011 Reference case, lower costs for fuel lead to lower electricity prices than in the AEO2010 Reference case. Electricity prices in 2035 (in 2009 dollars) are 9.2 cents per kilowatthour in the AEO2011 Reference case, compared with 10.3 cents per kilowatthour in the AEO2010 Reference case.