The price of crude oil could dip as low as $62/barrel or spike as high as $200/b by 2035 according to different economic growth scenarios published Monday as part of the Energy Information Administration's Annual Energy Outlook.
EIA, which published its "reference case" energy outlook earlier this year, updated the report to factor in alternate growth rates, the impact of crude prices on production, transportation fuel demand based on the adoption of new fuel efficiency standards, and other developments since the original forecast was published.
EIA's reference case called for crude to be trading at $145/b in 2035 in 2010 dollars. The "low oil price case" published Monday assumes a more sluggish economic growth rate in non-OECD countries such as China and India.
According to this scenario, growth is 1.5 percentage points lower than in the reference case, increasing by 3.5% each year from 2010 through 2035.
As a result, non-OECD demand for oil and other liquids drops by 7 million b/d and total world oil demand drops by 2 million b/d to 107 million b/d. Under these assumptions, crude would fall steadily after 2011 to $58/b in 2017, then rise slowly to $62/b in 2035.
On the supply side, the lower price weakens OPEC's ability to limit production and control prices, EIA said. Despite the lower prices, non-OPEC liquids production is maintained to about 2020 as projects currently being built or planned come on line. After 2020, non-OPEC production would decline under this scenario.
Production of "other liquids," which EIA defines as biofuels, oil sands, coal-to-liquids, biomass-to-liquids, gas-to-liquids, extra heavy oils and oil shale, increases as the cost of the technology to produce these liquids falls. Production of these liquids would increase to 16 million b/d in 2035, despite the lower crude prices, EIA forecasts.
HIGH-PRICE CASE FORESEES CONSTRAINED OPEC SUPPLY
In the "high oil price case," EIA assumes higher demand in non-OECD countries combined with constrained supply from OPEC, as well as the increased attractiveness of other liquids.
In this scenario, EIA assumes growth rates for China and India in 2012 that are 1 percentage point higher than forecast in the reference case. Growth in those two countries would also be about 0.3 percentage point higher in 2035, while growth in other non-OECD countries averages about 0.5 percentage point higher in 2012.
As a result, crude prices would hit $186/b in 2017 in 2010 dollars, and rise steadily to $200/b in 2035.
On the supply side, OPEC is assumed to reduce its market share somewhat, while higher prices make "other liquids" more attractive. In the high oil price scenario, other liquids production totals 17 million b/d in 2035, about 4 million b/d above the reference case.
The different price/supply scenarios have consequences for crude output in Alaska and the fate of the Trans Alaska Pipeline System, EIA said.
A shutdown of North Slope production is expected before 2035 under the low oil price case scenario. This scenario shows output below the 350,000 b/d and $5 billion/year thresholds assumed to be needed to keep TAPS active.
"In both the reference and high oil price cases, oil prices are sufficiently high both to stimulate the development of new North Slope oil fields, especially offshore, and to provide sufficient oil production revenues to keep the North Slope producing oil through 2035," the report said.
Likely areas of new production to feed TAPS would be Alaska's Chukchi and Beaufort Seas as well as production from the Arctic National Wildlife Refuge, the report said.
Shell is expected to begin exploratory drilling in the Chukchi and Beaufort Seas this summer.
