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(Errata as of 9/9/1999)

arrow1.gif (850 bytes)Preface

bullet1.gif (843 bytes)Administrator's Message

bullet1.gif (843 bytes)Overview

bullet1.gif (843 bytes)Legislation & Regulations

bullet1.gif (843 bytes)Issues in Focus

bullet1.gif (843 bytes)Market Trends

bullet1.gif (843 bytes)Forecast Comparisons

bullet1.gif (843 bytes)Major Assumptions for the Forecasts

bullet1.gif (843 bytes)Model Results (Appendix Tables)

bullet1.gif (843 bytes)Download Report

bullet1.gif (843 bytes)Acronyms

bullet1.gif (843 bytes)Contacts

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bullet1.gif (843 bytes)Assumptions to the AEO99

bullet1.gif (843 bytes)Supplemental Data to the AEO99

bullet1.gif (843 bytes)NEMS Conference

bullet1.gif (843 bytes)To Forecasting Home Page

bullet1.gif (843 bytes)EIA Homepage


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The Annual Energy Outlook 1999 (AEO99) presents midterm forecasts of energy supply, demand, and prices through 2020 prepared by the Energy Information Administration (EIA). The projections are based on results from EIA’s National Energy Modeling System (NEMS).

The report begins with an “Overview” summarizing the AEO99 reference case. The next section, “Legislation and Regulations,” describes the assumptions made with regard to laws that affect energy markets and discusses evolving legislative and regulatory issues. “Issues in Focus” discusses current energy issues—the economic decline in East Asia, growth in demand for natural gas, vehicle emissions standards, competitive electricity pricing, renewable portfolio standards, and carbon emissions. It is followed by the analysis of energy market trends.

The analysis in AEO99 focuses primarily on a reference case and four other cases that assume higher and lower economic growth and higher and lower world oil prices than in the reference case. Forecast tables for these cases are provided in Appendixes A through C. Appendixes D and E present a summary of the reference case forecasts in units of oil equivalence and household energy expenditures. Other cases explore the impacts of varying key assumptions in NEMS—generally, technology penetration. The major results are shown in Appendix F. Appendix G briefly describes NEMS and the AEO99 assumptions, with  a  summary  table of  the  cases. Appendix H provides tables of energy and metric conversion factors. AEO99, the detailed assumptions, and supplementary tables will be available on the EIA Home Page and on CD-ROM.

The AEO99 projections are based on Federal, State, and local laws and regulations in effect on July 1, 1998. Pending legislation and sections of existing legislation for which funds have not been appropriated are not reflected in the forecasts. Historical data used for the AEO99 projections were the most current available as of July 31, 1998, when most 1997 data but only partial 1998 data were available. Historical data are presented in this report for comparative purposes; documents referenced in the source notes should be consulted for official values. The AEO99 projections for 1998 and 1999 incorporate the short-term projections from the September update of EIA’s Short-Term Energy Outlook (STEO), Third Quarter 1998.

The AEO99 projections are used by Federal, State, and local governments, trade associations, and other planners and decisionmakers in the public and private sectors. They are published in accordance with Section 205c of the Department of Energy Organization Act of 1977 (Public Law 9591), which requires the Administrator of EIA to prepare an annual report that contains trends and projections of energy consumption and supply.

The projections in AEO99 are not statements of what will happen but of what might happen, given the assumptions and methodologies used. The projections are business-as-usual trend forecasts, given known technology, technological and demographic trends, and current laws and regulations. Thus, they provide a policy-neutral reference case that can be used to analyze policy initiatives. EIA does not propose, advocate, or speculate on future legislative and regulatory changes. All laws are assumed to remain as currently enacted; however, the impacts of emerging regulatory changes, when defined, are reflected.

Because energy markets are complex, models are simplified representations of energy production and consumption, regulations, and producer and consumer behavior. Projections are highly dependent on the data, methodologies, model structures, and assumptions used in their development. Behavioral characteristics are indicative of real-world tendencies rather than representations of specific outcomes.

Energy market projections are subject to much uncertainty. Many of the events that shape energy markets are random and cannot be anticipated, including severe weather, political disruptions, strikes, and technological breakthroughs. In addition, future developments in technologies, demographics, and resources cannot be foreseen with any degree of certainty. Many key uncertainties in the AEO99 projections are addressed through alternative cases.

EIA has endeavored to make these projections as objective, reliable, and useful as possible; however, they should serve as an adjunct to, not a substitute for, analytical processes in the examination of policy initiatives.

Administrator's Message

As we present the projections in the Annual Energy Outlook 1999 (AEO99), it is important to clarify what these projections represent. While the reference case projections do not hypothesize radical changes in energy markets and energy-using and producing technologies, they do assume continuing market changes and improvements in energy technologies, derived from past trends.

The Energy Information Administration (EIA) endeavors to represent current energy market conditions, both domestic and worldwide, and their impacts on future energy trends. An important example of such transitory issues is the ongoing economic crisis in East Asia, which currently is depressing world oil demand and prices and domestic oil production. Another is the continuing restructuring of the U.S. electricity industry and the movement to competitive pricing of electricity. Both of these topics are featured in AEO99, and they are included in the reference case projections.

In addition to the longer-term impacts of current market transitions, the reference case projections also include the impacts of a number of potential changes in energy markets—most notably, technology. Substantial productivity improvements and other technological advances are assumed for the fossil fuel supply sectors, in accordance with recent historical trends, accounting in part for the decline of coal prices and the relatively modest increases in oil and natural gas prices in the projections. The projections also incorporate all new and advanced energy-consuming and generating technologies that are assumed with a reasonable degree of confidence to be available by 2020. As a result, energy intensity—the amount of energy used for each dollar of output in the economy—declines by an average of 1 percent a year through 2020. In contrast, from 1986 to 1996, energy intensity was essentially flat.

Because the future cannot be known with certainty, it is possible that any of the assumptions, including the availability and characteristics of technology, may be too optimistic or pessimistic. For that reason, AEO99 includes a wide range of alternative cases examining the effects of variations in many key assumptions.

As a policy-neutral organization, EIA does not incorporate future changes in energy-related legislation, regulation, or policy into its projections. Because of this neutrality and the “most likely” nature of the energy trends, the reference case projections provide a solid baseline against which a variety of alternative policies and assumptions can be analyzed and evaluated. One example of the analytical work performed by EIA relative to its reference projections over the past several years is the recent report, Impacts of the Kyoto Protocol on U.S. Energy Markets and Economic Activity, prepared at the request of the U.S. House of Representatives Committee on Science. Other recent work includes:

  • Analysis of S. 687, the Electric System Public Benefits Protection Act of 1997, at the request of Senator James M. Jeffords
  • An Analysis of FERC’s Final Environmental Impact Statement for Electricity Open Access and Recovery of Stranded Costs, also at the request of Senator Jeffords
  • The Impacts on U.S. Energy Markets and the Economy of Reducing Oil Imports, for the U.S. General Accounting Office
  • Analysis of Carbon Stabilization Cases, for the U.S. Department of Energy, Office of Policy and International Affairs
  • The Impacts of Increased Diesel Penetration in the Transportation Sector, for the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy.

Jay E. Hakes
Energy Information Administration

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File last modified: September 9, 1999

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