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Preface
The Annual Energy Outlook 2004 (AEO2004) presents
midterm forecasts of energy supply, demand, and prices through 2025
prepared by the Energy Information Administration (EIA). The projections
are based on results from EIA’s National Energy Modeling System
(NEMS).
The report begins with an “Overview” summarizing the
AEO2004 reference case. The next section, “Legislation and
Regulations,” discusses evolving legislation and regulatory
issues. “Issues in Focus” includes discussions of future
labor productivity growth; lower 48 natural gas depletion and productive
capacity; natural gas supply options, with a focus on liquefied
natural gas; natural gas demand for Canadian oil sands production;
National Petroleum Council forecasts for natural gas; natural gas
consumption in the industrial and electric power sectors; nuclear
power plant construction costs; renewable electricity tax credits;
and U.S. greenhouse gas intensity. It is followed by a discussion
of “Energy Market Trends.”
The analysis in AEO2004 focuses primarily on a reference case and
four other cases that assume higher and lower economic growth and
higher and lower world oil prices. Forecast tables for those cases
are provided in Appendixes A through C. Appendix D provides a summary
of key projections in oil equivalent units. Appendix E summarizes
projected household expenditures for each fuel by region and household
income quintiles. The major results for the alternative cases, which
explore the impacts of varying key assumptions in NEMS (such as
technology penetration rates), are summarized in Appendix F. Appendix
G briefly describes NEMS, the AEO2004 assumptions, and the alternative
cases.
The AEO2004 projections are based on Federal, State, and local
laws and regulations in effect on September 1, 2003. The potential
impacts of pending or proposed legislation, regulations, and standards
(and sections of existing legislation requiring funds that have
not been appropriated) are not reflected in the projections. For
example, AEO2004 does not include the potential impact of the pending
Energy Policy Act of 2003. In general, the historical data used
for AEO2004 projections are based on EIA’s Annual Energy Review
2003, published in October 2003; however, data are taken from multiple
sources. In some cases, only partial or preliminary 2002 data were
available. Historical data are presented in this report for comparative
purposes; documents referenced in the source notes should be consulted
for official data values. The projections for 2003 and 2004 incorporate
short-term projections from EIA’s September 2003 Short-Term
Energy Outlook.
Federal, State, and local governments, trade associations, and
other planners and decisionmakers in the public and private sectors
use the AEO2004 projections. They are published in accordance with
Section 205c of the Department of Energy Organization Act of 1977
(Public Law 95-91), which requires the EIA Administrator to prepare
annual reports on trends and projections for energy use and supply.
The projections in AEO2004 are not statements of what will
happen but of what might happen, given the assumptions and
methodologies used. The projections are business-as-usual
trend forecasts, given known technology, technological and
demographic trends, and current laws and regulations. Thus,
they provide a policy-neutral reference case that can be used
to analyze policy initiatives. EIA does not propose, advocate,
or speculate on future legislative and regulatory changes.
All laws are assumed to remain as currently enacted; however,
the impacts of emerging regulatory changes, when defined,
are reflected.
Because energy markets are complex, models are simplified
representations of energy production and consumption, regulations,
and producer and consumer behavior. Projections are highly
dependent on the data, methodologies, model structures, and
assumptions used in their development.
Behavioral characteristics are indicative of real-world
tendencies rather than representations of specific outcomes.
Energy market projections are subject to much uncertainty.
Many of the events that shape energy markets are random and
cannot be anticipated, including severe weather, political
disruptions, strikes, and technological breakthroughs. In
addition, future developments in technologies, demographics,
and resources cannot be foreseen with any degree of precision.
Many key uncertainties in the AEO2004 projections are addressed
through alternative cases.
EIA has endeavored to make these projections as objective,
reliable, and useful as possible; however, they should serve
as an adjunct to, not a substitute for, analytical processes
in the examination of policy initiatives.
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Released: January 2004
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