1. Rising Food and Energy Prices October 2 nd, 2008 Corvallis, Oregon A. Michael Schaal Director, Oil and Gas Division Office of Integrated Analysis and Forecasting Energy Information Administration Projections for Energy Markets 2008-18 and Beyond

2. Rising Food and Energy Prices Outline EIA’s Annual Energy Outlook 2008 Reference Case Impacts of Revised CAFE and Renewable Fuel Standard Alternative Scenarios For AEO 2008

3. Rising Food and Energy Prices HistoryProjection Energy use per capita and per dollar of GDP (index, 1970=1.0) per capita per dollar real GDP

4. Rising Food and Energy Prices U.S. Primary Energy Consumption by Fuel, 1960-2030 (quadrillion Btu) HistoryProjections Natural Gas Coal Nuclear Renewables Liquid Fuels & Other Petroleum

5. Rising Food and Energy Prices U.S. Primary Energy Consumption by Fuel, 1960-2030 (quadrillion Btu) HistoryProjections Liquid Fuels Natural Gas Coal Nuclear Renewables quadrillion Btu

6. Rising Food and Energy Prices Natural Gas Consumption by End-Use Sector Transportation** Industrial* Residential Commercial Electric Power Projections History * Includes lease and plant fuel ** Includes pipeline fuel trillion cubic feet

7. Rising Food and Energy Prices HistoryProjections U.S. Electricity Demand Growth Trends Annual Growth 1950s9.0% 1960s7.3% 1970s4.2% 1980s3.1% 1990s2.4% 2000-20051.2% 2005-20301.1%

8. Rising Food and Energy Prices U.S. Electricity Consumption Growth by Sector Residential Industrial Commercial ProjectionsHistory billion kilowatthours

9. Rising Food and Energy Prices Electricity Generation by Fuel Type Petroleum Renewables Coal Natural Gas Nuclear HistoryProjections billion kilowatthours

10. Rising Food and Energy Prices AEO 2008 Outlook Affected By The Energy Independence and Security Act of 2007 Increased Corporate Average Fuel Economy (CAFE). –Light Duty Vehicle fuel economy standard of 35 miles per gallon by 2020. Increased and Diversified the Renewable Fuels Standard (RFS) Other End-Use Efficiency Standards.

11. Rising Food and Energy Prices New Light-Duty Vehicle Fuel Efficiency (miles per gallon)

12. Rising Food and Energy Prices Industrial Transportation Residential and Commercial Electric Power ProjectionsHistory The Transportation Sector Dominates Liquid Fuels Consumption. million barrels per day

13. Rising Food and Energy Prices U.S. Sales of Unconventional Light-Duty Vehicles, 2015 and 2030 (thousand vehicles sold) Hybrids Flex Fuel Turbo Direct Injection Diesel Gaseous Electric Fuel Cell

14. Rising Food and Energy Prices Motor Fuels Demand (million barrels per day) * Motor Gasoline includes E85

15. Rising Food and Energy Prices Bringing Liquid Fuels to Market Bio-Refinery Tanker, Barge or Rail

16. Rising Food and Energy Prices EISA 2007 Expands the Renewable Fuel Standard (RFS) Mandate (billion credits, ethanol equivalent gallons)

17. Rising Food and Energy Prices Advanced Biofuels Mandate RFS with Paragraph 7 Adjustments billion credits Cellulosic Ethanol Net Ethanol Imports Biodiesel Legislated RFS Liquids from Biomass (BTL) Ethanol from Other Feedstocks

18. Rising Food and Energy Prices Corn Based Ethanol Legislated RFS Cellulose Based Ethanol Meeting the Renewable Fuels Standard Net Ethanol Imports billion credits Biodiesel Liquids from Biomass (BTL) RFS with Paragraph 7 Adjustments Ethanol from Other Feedstocks

19. Rising Food and Energy Prices Distribution of Ethanol Volumes Requires E85 Sales (billion gallons) 2030

20. Rising Food and Energy Prices Motor Fuels by Source (billion gallons)

21. Rising Food and Energy Prices Gas-to-Liquids, Coal-to-Liquids, Biomass-to-Liquids, and Oil Shale Production in the Price Cases, 1990-2030 (million barrels per day) Coal to Liquids/ High price Gas to Liquids/ High price HistoryProjections Oil Shale/High price Biomass to Liquids/ Reference Coal to Liquids/ Reference

22. Rising Food and Energy Prices Liquid Fuels Consumption and Domestic Supply Consumption Domestic supply History Projection million barrels per day Net Imports 60% 54% 61% AEO2008 AEO2007

23. Rising Food and Energy Prices AEO2008 2030 Total Carbon Dioxide Emissions million metric tons Delivered, including losses AEO2007 2030 2006 AEO2008 AEO2007 Carbon Dioxide Emissions

24. Rising Food and Energy Prices AEO 2008 Scenarios Reference Early Release Reference Low Economic Growth High Economic Growth Low Price High Price Residential: 2008 Technology Residential: High Technology Residential: Best Available Technology Commercial: 2008 Technology Commercial: High Technology Commercial: Best Available Technology Industrial: 2008 Technology Industrial: High Technology Transportation: High Technology Electricity: Low Nuclear Cost Electricity: High Nuclear Cost Electricity: Low Fossil Cost Electricity: High Fossil Cost Renewable Fuels: High Renewable Cost Renewable Fuels: Low Renewable Cost Oil and Gas: Rapid Technology Oil and Gas: Slow Technology Oil and Gas: High LNG Supply Oil and Gas: Low LNG Supply Oil and Gas: ANWR Coal: Low Coal Cost Coal: High Coal Cost Integrated 2008 Technology Integrated High Technology Integrated Alternative Weather Case High Commodity Cost Low Commodity Cost Restricted Non-Natural Gas Electricity Generation Restricted Natural Gas Supply Combined High Demand/Low Natural Gas Supply Case

25. Rising Food and Energy Prices Policy Change Possibilities Greenhouse Gas Legislation 25

26. Rising Food and Energy Prices Recent EIA Policy Analysis Energy and Economic Analysis of S. 2191, America’s Climate Security Act of 2007 – April 2008 Energy and Economic Analysis of S. 1766, the Low Carbon Economy Act of 2007 Proposal requiring 25 percent renewable fuels in the motor vehicle transportation and electricity markets by 2025 26

27. Rising Food and Energy Prices Recent EIA Policy Analysis (Continued) Analysis of S. 280, the Climate Stewardship and Innovation Act of 2007 Impacts of a 15-Percent Renewable Portfolio Standard, June 2007 All available at: –http://www.eia.doe.gov/oiaf/service_rpts.htmhttp://www.eia.doe.gov/oiaf/service_rpts.htm –http://www.eia.doe.gov/oiaf/analysis.htmhttp://www.eia.doe.gov/oiaf/analysis.htm 27

28. Rising Food and Energy Prices Key GHG Policy Analysis Factors Stringency of emission limits Coverage –What gases? What sectors? Timing / Banking Treatment of offsets –Foreign and domestic -- Agricultural and forestry Safety Valve / Technology Accelerator Payment Allowance allocation methodology Use of allowance revenue and other supporting programs 28

29. Rising Food and Energy Prices Climate Stewardship and Innovation Act of 2007 (S. 280) Caps GHG emissions on covered entities in the electric generation, commercial, and industrial sectors, together with producers and importers of hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride, and petroleum refiners and product importers. Covered entities include all entities in covered sectors that own or control a single facility with emissions of 10,000 metric tons or more. –Emissions of covered entities accounted for an estimated 78 percent of total U.S. GHG emissions in 2004. –As emissions by covered entities are subject to limits that tighten over time under S.280, their share in total U.S. GHG emissions falls. 29

30. Rising Food and Energy Prices Climate Stewardship and Innovation Act of 2007 (S. 280) Covered Entity Emission Limits Time PeriodLimit Description 2012 through 2019 2004 level 2020 through 2029 1990 level 2030 through 2049 18 percent below 1990 level 2050 and beyond 60 percent below 1990 level Offsets (domestic or international) can be used in an amount equivalent to up to 30 percent of the allowance obligation 30

31. Rising Food and Energy Prices Energy-Related CO 2 Emissions: S.280 (million metric tons) 200520202030 2005 Actual Reference S.280 Reference S.280 31

32. Rising Food and Energy Prices Electricity Generation by Fuel : S.280 ( billion kilowatthours) Reference CaseS. 280 Core Case Nuclear and renewable generation grows, displacing coal-fired generation. Nuclear and renewables are generally less expensive than coal with carbon capture and sequestration (CCS) without any special incentives. S.280 is also projected to reduce electricity demand growth, reflecting both higher electricity prices and targeted support of high-efficiency equipment Coal w/o CCSNuclearRenewablesNatural GasOil/Other 32

33. Rising Food and Energy Prices Summary In the AEO 2008 Reference Case traditional fossil fuels are expected to continue to meet the bulk of energy requirements over the projection period U.S. energy demand is projected to grow at an average annual rate of 0.7 percent The energy efficiency of the economy is projected to increase at an average annual rate of 1.7 percent EISA 2007 will have a significant impact on liquid fuels production and use. –Lower petroleum imports –Lower CO2 Emissions –Shift towards diesel

34. Rising Food and Energy Prices Summary (continued) The RFS, made up of four mandates, met by a combination of ethanol, diesel production and imports. –Achieves 32 billion gallons by 2022 –RFS implementation is in its early phases and significant uncertainties remain. The impacts of GHG policies depend on the specifics of the proposal but the likely impacts include: –Lower coal generation –Greater nuclear, renewable, and natural gas (under some circumstances) generation –Reduced energy demand –Higher energy prices Key uncertainties include: –Cost, performance and feasibility of rapidly commercializing and deploying key low- carbon generating technologies –Cost and availability of domestic and foreign offsets –If these technologies can not be deployed in a timeframe consistent with the emission reduction requirements, allowance prices, energy prices and the use of other low- carbon fuels, particularly natural gas, will be higher

35. Rising Food and Energy Prices A. Michael Schaal Energy Information Administration Michael.Schaal@eia.doe.gov Annual Energy Outlook 2008, June 2008 Short Term Energy Outlook, Monthly AEO 2008 Assumptions, June 2008 www.eia.doe.gov