The EIA's "Short-Term Energy Outlook," released on January 11, projects continued tightening of world oil markets over the next two years, with consumption growing by an annual average of 1.5 million barrels per day. At the same time, supply growth from non-OPEC countries will average less than 0.1 million barrels per day each year.
The EIA expects oil markets to rely on OPEC production increases and to draw down inventories to fill the demand gap. As a result, crude oil is expected to average $93 per barrel in 2011 and $98 per barrel in 2012, although these figures depend heavily on the rate of economic growth and on the magnitude of OPEC production increases. Crude oil spot prices averaged more than $89 per barrel in December 2010, about $5 per barrel higher than the November average.
In the US, the primary impact of increasing crude oil prices will be on the price of motor fuels. The EIA expects retail prices for regular-grade gasoline to rise from an average of $2.78 per gallon in 2010 to $3.17 per gallon in 2011 and $3.29 per gallon in 2012. Likewise, retail prices for on-highway diesel fuel will rise from $2.99 per gallon in 2010 to $3.40 per gallon in 2011 and $3.52 per gallon in 2012.
Because of increased demand in summer, EIA anticipates this year's peak monthly average price for gasoline will be reached in July, when it is projected to crest at $3.27 per gallon. There's a 7% chance the retail price of gasoline will top $4 per gallon in July.
Although increased consumption of motor fuels will raise carbon emissions, projected declines in fossil-fuel consumption for generating electricity should result in an overall decline in carbon emissions of 0.6% in 2011. In 2012, projected economic growth will lead to a 2.4% increase in energy-related emissions. See the EIA's "Short-Term Energy Outlook."
The International Energy Agency (IEA) confirms in its latest Oil Market Report that oil markets are indeed following the trends noted by the EIA, namely, that higher oil demand is being met with a drawdown of inventories and greater production from OPEC countries. The IEA notes that OPEC oil production increased by 250,000 barrels per day in December 2010, reaching 29.58 million barrels per day, while inventories in developed countries (those belonging to the Organisation for Economic Co-operation and Development, or OECD) dropped by 8.3 million barrels in November 2010, reaching 2,742 million barrels. See the highlights from the report on the IEA's Oil Market Report Web site.
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EREE Network News is a weekly publication of the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy (EERE).
