Energy Issues and the Impacts on Freight Transportation

Dr. Mark Rodekohr

Energy Information Administration

May 17, 2006

Presentation Organization

• Short-Term Fuel Price Outlook for Freight Fuels

• Longer Term Outlook for the Freight Sector

West Texas Intermediate Crude Oil Price(Base Case and 95% Confidence Interval*)

*The confidence intervals show +/- 2 standard errors based on the properties of the model.

0

10

20

30

40

50

60

70

80

90

100

Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08

Dollarsper

barrel

Forecast

U.S. Distillate Fuel Prices

0255075

100125150175200225250275300325350

Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08

Retail Diesel Retail Heating Oil WTI Crude Oil

Forecast

Cents

per

gallon

*Includes OPEC non-crude production, MMBD= million barrels per day

Growth in World Consumption & Non-OPEC Production

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2003-Q1 2003-Q3 2004-Q1 2004-Q3 2005-Q1 2005-Q3 2006-Q1 2006-Q3 2007-Q1 2007-Q3

MM

BD

Ch

ang

e fr

om

pre

vio

us

year

-7

0

7

14

21

28

$ P

er B

arre

l Ch

ang

e fr

om

Pre

vio

us

Yea

r

DemandNon-OPEC Supply*WTI Crude Oil Price

Demand growth exceeds

non-OPEC supply growth

Forecast

0

1

2

3

4

5

6

1991-1997

Average

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

World Oil Surplus Production Capacity

Forecast

Million barrels per day

Major Events and World Oil Prices1970-2005

0

20

40

60

80

1970 1975 1980 1985 1990 1995 2000 2005

Refiner Acquisition Cost of Imported Crude Oil (Saudi Light Official Price for 1970-73)

Oil Embargo

Iranian Revolution

Iran-Iraq War Begins

Saudis abandon "swing producer" role

Iraq Invades Kuwait

Operation Desert Storm

OPEC cutbacks

9/11 attacks

Venezuela Unrest

Strong Demand Growth

Asian Economic Crisis

Hurricanes Katrina and Rita Strike U.S. Gulf Coast

dollars per barrel

EIA Has Reassessed Its Long-Term Oil Price Projection

• Major oil producing countries pace investment more consistent with higher oil price path

• Investment impediments more persistent, even after several years of relatively higher oil prices

• Cost of doing business increasing

• Not due to “Peak Oil” considerations, although we are following this issue closely

0

20

40

60

80

1980 1990 2000 2010 2020 2030

History

AEO2005

AEO2006

World Oil Price, 1980-2030(2004 dollars per barrel)

History Projections

Annual Energy Outlook 2005 and 2006

U.S. Petroleum Consumption by Sector, 1970-2030(million barrels per day)

0

5

10

15

20

1970 1980 1990 2000 2010 2020 2030

Industrial

Transportation

Residential and Commercial

Electric Power

ProjectionsHistory

Annual Energy Outlook 2006

U.S. Transportation Energy Consumption by Mode, 1980-2030(quadrillion Btu)

0

5

10

15

20

25

1980 1990 2000 2010 2020 2030

ProjectionsHistory

Annual Energy Outlook 2006

Light-Duty Vehicles

Rail

Freight Trucks

Water

Air

Bus

U.S. Heavy-Duty Vehicle Energy Consumption, 1980-2030(quadrillion Btu)

0

1

2

3

4

5

6

7

8

1980 1990 2000 2010 2020 2030

ProjectionsHistory

Annual Energy Outlook 2005 and 2006

AEO2006AEO2005

U.S. Heavy-Duty Travel, 1980-2030(billion miles)

0

50

100

150

200

250

300

350

400

450

1980 1990 2000 2010 2020 2030

ProjectionsHistory

Annual Energy Outlook 2005 and 2006

AEO2006AEO2005

U.S. Heavy-Duty Vehicle Efficiency, 1980-2030(miles per gallon)

5

6

7

1980 1990 2000 2010 2020 2030

ProjectionsHistor

y

Annual Energy Outlook 2005 and 2006

AEO2006

AEO2005

U.S. Heavy-Duty Vehicle Sales, 1980-2030(thousands)

0

100

200

300

400

500

600

700

1980 1990 2000 2010 2020 2030

ProjectionsHistory

Annual Energy Outlook 2005 and 2006

AEO2006

AEO2005

U.S. Heavy-Duty Vehicle Technology Penetration, 2000-2030(percent)

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2000 2010 2020 2030

Annual Energy Outlook 2006

Internal Friction Reduction

Advanced Drag Reduction

Advanced Fuel Injection

-30

-20

-10

0

10

20

30

U.S. Transportation Fuel Use in Two Technology Cases(percent change from reference case)

2005 Technology

High Technology

Light-DutyVehicles

FreightTrucks Aircraft Light-Duty

VehiclesFreightTrucks Aircraft

2010 2030

Annual Energy Outlook 2006

World Transportation Sector Energy Use by Region, 2002-2025 (quadrillion Btu)

0

10

20

30

40

50

60

70

2002 2010 2015 2020 2025

Mature Market Economies Transitional Economies Emerging Economies

International Energy Outlook 2005

World Oil Reserves by Country, as of January 1, 2006(billion barrels)

0 50 100 150 200 250 300

Rest of WorldUnited

IndonesiaEcuador

AngolaOmanIndia

AzerbaijanNorway

KazakhstanBrazil

AlgeriaMexico

QatarChina

United StatesNigeria

LibyaRussia

VenezuelaUAE

KuwaitIraqIran

CanadaSaudi Arabia

Oil & Gas Journal, Vol. 103, No. 47 (December 19, 2005).

World Total =1,293 Billion Barrels