OIL PRICES
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expenditures for energy and energy may account for up to 50% of
the cost of running a refinery. Another variable is the location of the
refinery insofar as the closer a refinery is to the crude oil source and
a high demand market, the lower transportation costs for incoming
feedstock and outgoing products.
6.7 Outlook
Crude oil is the lifeblood of the economy of the United States and,
for over a century, has played a dominant role in the economy. Oil
currently accounts for close to 40%of total energy consumption
in the US. However, while the U.S. economy grew significantly at
63%, after 1985, oil consumption grew much more slowly at 25%.
Thus, our economy is far less dependent on oil than it was in 1973,
the year of the Arab oil embargo.
Nonetheless, as the United States emerges from the current
recession and the economy grows over the next few decades, the
demand for oil will also grow. According to the Energy Information
Administration (EIA), demand for oil in the United States is
expected to rise from an annual average of 19.7 million barrels per
day to more than 26 million bpd in 2020. At the same time, forecasts
indicate that domestic oil production in the United States will likely
see little, if any, growth; it is more likely to see reduction in view
of the poor judgment by the United States Congress in not seeking alternate sources of energy. Therefore, the United States will
increasingly rely on foreign sources to meet its oil needs. Currently,
more than 65% of the crude oil and crude oil products used in the
United States is imported from foreign sources. And, over the next
two decades, imports of petroleum and petroleum products are
expected to increase by more than 6 million barrels per day as oil
consumption rises.
The historical record shows substantial variation in world oil
prices, and there is the likelihood of even more uncertainty about
future prices when longer time periods are examined. It is possible
to consider three price cases to illustrate the uncertainty of prospects for future world oil resources (Annual Energy Outlook, 2008).
In the reference case, world oil prices increase moderately from current levels (ca. $39 per barrel) to about $57 per barrel in 2016, start
rising again as production in non-OPEC regions peaks, and continue rising to $70 per barrel in 2030 (all prices in 2006 dollars).
187
expenditures for energy and energy may account for up to 50% of
the cost of running a refinery. Another variable is the location of the
refinery insofar as the closer a refinery is to the crude oil source and
a high demand market, the lower transportation costs for incoming
feedstock and outgoing products.
6.7 Outlook
Crude oil is the lifeblood of the economy of the United States and,
for over a century, has played a dominant role in the economy. Oil
currently accounts for close to 40%of total energy consumption
in the US. However, while the U.S. economy grew significantly at
63%, after 1985, oil consumption grew much more slowly at 25%.
Thus, our economy is far less dependent on oil than it was in 1973,
the year of the Arab oil embargo.
Nonetheless, as the United States emerges from the current
recession and the economy grows over the next few decades, the
demand for oil will also grow. According to the Energy Information
Administration (EIA), demand for oil in the United States is
expected to rise from an annual average of 19.7 million barrels per
day to more than 26 million bpd in 2020. At the same time, forecasts
indicate that domestic oil production in the United States will likely
see little, if any, growth; it is more likely to see reduction in view
of the poor judgment by the United States Congress in not seeking alternate sources of energy. Therefore, the United States will
increasingly rely on foreign sources to meet its oil needs. Currently,
more than 65% of the crude oil and crude oil products used in the
United States is imported from foreign sources. And, over the next
two decades, imports of petroleum and petroleum products are
expected to increase by more than 6 million barrels per day as oil
consumption rises.
The historical record shows substantial variation in world oil
prices, and there is the likelihood of even more uncertainty about
future prices when longer time periods are examined. It is possible
to consider three price cases to illustrate the uncertainty of prospects for future world oil resources (Annual Energy Outlook, 2008).
In the reference case, world oil prices increase moderately from current levels (ca. $39 per barrel) to about $57 per barrel in 2016, start
rising again as production in non-OPEC regions peaks, and continue rising to $70 per barrel in 2030 (all prices in 2006 dollars).