 and a hushed wall is over the room. So good afternoon and welcome. I'm Frank Verastro. I'm a senior vice president here at CSIS and I hold a sluss in your chair, so I'm both honored and humbled to be doing that. But it's our great pleasure today to have with us, Adam Saminsky. Adam is a long time friend. And a student observer of oil markets and energy markets generally, a candid commenter. And so we always welcome, used to be, now that he's in government, he's much more cautious with his projections because EIA doesn't do policy. I was told at the beginning of this presentation to make sure, because EIA is so valuable, that we'll either pass the hat or we'll increase EIA's appropriations to get all the work done that we need them to do. When the annual energy outlook comes out and also when the international outlook comes out, a lot of people look at it because it's the reference guide to what goes on in the world. So it's energy markets, looking at economics, trade flows, price bands, and other factors that influence both supply and demand. And in this current environment, if that weren't tough enough, the fact that now we have six sensitivity cases, high and low economic growth, high and low prices, and now the resource model, low resource base, high resource base. It actually gets a little bit more complex, but it presents a better mosaic of what's going on. So at any point in time, it gives you a really good picture. The forecast goes out to 2040. The last time Adam was here, he talked about both the prices and timing, and if you're a smart forecaster, you never put them both in the same sentence. You can do one or the other, just don't put them together. But if you'll join me in welcoming Adam Szyminski, it's always great to have him here. We will post the slides at the end of the presentation and there's booklets out front, the way you came in. Quick safety second, we should have done this at the outset. For those of you, there's two exits who are on the second floor. If you go through the back here, it'll take you down stairways to the alley, drops you off on M Street. If you go out the front way the way you came, it's down one flight of stairs across Rhode Island Avenue. There's a park to the right of the Beacon Hotel and that's where we assembled. Don't expect anything to happen. We had Sally Jewel here about three weeks ago and she proceeded to open her remarks with the statement that I just heard you all had a gas leak. And the back half of the room cleared out and of course the gas leak was on 17th and M but we had a corral everyone and bring them back in. So Adam, thank you so much for coming. Adam is just back from Mexico. So if he lapses into Spanish, you'll know why that is. But welcome and... Trifidacity. Trifidacity. Trifidacity. Trifidacity. Trifidacity. Trifidacity. There we go. A little closer. How's that? Great. Okay. Say again. Gas leak. No. It's not a... She's, you know... Electronically. Okay. Frank, thank you very much. I really appreciate the opportunity to be back here at CSIS. Frank spared you. The last time I was over here in this room, Frank said that Adam used to be one of the senior advisors at CSIS and he's only one policy remark away from returning. So we'll try to limit the policy remarks. The trends in the 2015 outlook, the annual energy outlook, which I keep thinking we should rename for the U.S. annual energy outlook to distinguish it from the international energy outlook, is out. We're on a two-year release cycle. So those six cases that you mentioned, the reference case, high and low oil prices, high and low economy, and the high resources case are actually a cut down from even more cases that we would typically run in the annual energy outlook. And the reason that there's just a fewer number of cases is we are trying to actually redeploy some of the resources, the people, time, and so on to the international outlook, which I think everybody at EIA believes is critically important. I mean, obviously, we want to cover the domestic situation really well, but you can't really understand the energy outlook for the United States if you don't have a pretty good idea of what's going to happen around the world. So the documentation for all of this will be completed in the full years of the annual energy outlook. So next year we'll have the complete set of everything. The value in running even the cases that we do in the AEO essentially involve the ability to use a reference case to assess policy. So we're not going to make policy, we're not going to have recommendations on policy, but policy makers can start with the data and analysis in the annual energy outlook as a good point to begin what they're looking at. So let's see if this works. There we go. So let's talk about some of the key results. And I'm going to try to go through this. The first few slides pretty quickly in order to get to some of the details that are behind these summary results. So this is the summary, think of this as being the executive summary. In most of the AEO 2015 cases, the U.S. becomes a net energy exporter, or our net energy imports really decline and end. This screen says by 2030, but most of the heavy lifting as you'll see in a diagram in just a little bit happens in the years after 2020, so early in the next decade. The underline on this is energy in total, not oil, we'll get into the oil issue, but so going down the list. Strong growth in domestic production of crude oil and limited growth in demand leads to a decline in net petroleum imports. We don't become a net petroleum exporter in total, but the numbers stay fairly low. The U.S. does indeed become a net exporter of natural gas, and that's fairly soon in this outlook in the year 2017. Energy consumption, so looking at this from the demand side, grows at a fairly modest rate over the entire projection period. A lot of that has to do with a less energy-intensive economy driven by technology and some of the existing laws and regulations like fuel efficiency standards for automobiles. Renewables provide an increasing share of electricity generation. Even with plenty of availability of natural gas, the growth in renewables is fairly strong. Looking at a few other key results, improved efficiency of energy consumption across the end-use sectors shifts away from carbon-intensive fuels, both combined to stabilize carbon dioxide emissions that remain below the 2005 level of about 6 billion metric tons in the year 2005, all the way out through the forecast period to 2040. Growth of domestic crude oil and natural gas production varies significantly across the region, so a lot of growth in the Dakotas, the mid-continent area, as well as the Gulf Coast for oil and natural gas in Pennsylvania and Ohio and the Marcellus and Utica. All of that suggests the need for infrastructure changes to deal with that growth in production. And final, just kind of word, this annual energy outlook does not, N-O-T, include the Clean Power Plan, the EPA 111B and D rule that's being considered. We will have a separate report on that out probably in May, and since it's not part of the existing law and regulation and because it's complicated, we wanted to get the reference case of the annual energy outlook out first. Okay, let's go on to just a few other things here in the summary of the summary. Here's one comparison between last year's annual energy outlook and this year's. I won't show too many of these because what we really like to concentrate on is what's in the reference case and the side cases rather than constantly making comparisons to prior annual energy outlooks, but we thought this one was really important, one of the big changes and one of the reasons why it took longer than we thought to get the annual energy outlook done was partway through the modeling period. We had a big change in the crude oil price outlook and general situation, so we have significantly lower prices in the near term in the AEO 2015 for crude oil, but as you can see in that graph, by the time we get to 2040, we're back pretty much to where we were in the 2014 AEO. This chart shows reductions in energy intensity basically being offset, the impact of what would be driving demand up GDP growth and what we end up with is slower growth and overall energy use, where you have total energy use going from about 97 quadrillion BTUs in 2013 to about 106 Qs in 2040, most of that growth is in consumption of natural gas and renewable energy. In the oil area, transportation sector continues to dominate the demand, but there is a significant shift within the transportation sector from gasoline, which we see going down to growth in diesel and jet fuel, so the middle part of the barrel. On the natural gas side, a lot of the growth in natural gas consumption we expect will be in electricity generation as well as in the industrial sector, and I'll show you some slides on that in a bit. Total use in the reference case grows a little bit from 18 Qs to 19 Qs in 2040. Keep in mind that this doesn't include the EPA 111D, and that would make a difference in these results. Wind power on the renewable side becomes the largest source of renewable energy exceeding hydropower by the end of the period, so we see a lot of growth in solar and wind. Nuclear kind of stays fairly close to current levels. Want to look here at net energy imports, so again, keep in mind this is energy. Total under different cases, the net energy imports decline and ultimately end. You can see the reference case there in the darkest color. The lines do cross out towards the end of the next decade, but you can see that most of the drop actually occurs a little bit earlier than that, so the possibility that the U.S. becomes a kind of flat or even a net energy exporter earlier in the decade, the coming decade, is realistic possibility depending on a number of things that happen, and we can talk about that in a bit. The economic growth assumptions will have a lot to do with this, and so we, as well as the choice of oil price assumptions, a low oil price case, you don't make as much progress on imports as you do under a high oil price case or a high resources case. CO2 emissions are sensitive to the economic growth in energy price trends, and in the reference case, we're still below, 8% below the 2005 level that you see that peak towards the left-hand side of the graph. High economic growth leads to more fuel consumption, and greater CO2 output, low economic growth is just the opposite. The reference case is still a fairly impressive performance in the U.S. to have the combination of both economic growth and population growth and still be able to keep those numbers reasonably in check under existing law and regulation. I mentioned the population growth and economic growth numbers, and here's just a little bit more detail on that. The underlying assumptions here is that energy use per dollar of GDP declines at about 2% per year over the forecast period. Energy use per capita declines at just a little under a half percent per year. The U.S., the underlying assumption for GDP growth is at about 2.4% per year, but in the high economic growth case, you end up having GDP at 2.9% per year, and that results in somewhat greater output. One of the things, this is the advertising section of the presentation today, we have built and provided for your use a new set of table browsers. We started with Kohl, we extended that to other fuels and areas in the EIA website. The table browsers are really easy to use to make the data, in a sense, come to life with graphics interactive, a lot of choices in scales and units that you want to show. The AEO has always had a table browser, but this year it's in the new version of our table browsers, and so it's going to be very easy for everybody to look at all of these cases and the data and graph them for kind of a help and aid in understanding what's going on. The thing I'd like to do now is first talk a little bit more detail about petroleum, then we'll look at natural gas, and then the third thing will be electricity, and then Frank, that'll do it, and we'll be happy to take questions, but let's look at the petroleum numbers in a little bit more detail. What you see here is a high oil price case, a low oil price case, and a high resources case. The biggest differences, of course, are in the high oil price and low oil price case for how we made the assumptions or how the assumptions came out of the model in terms of trying to make some sense of this. The reference case, as I said earlier, is not a whole lot different in the long run from what we had assumed before, but it's lower in the front end. The low oil price case basically assumes that prices stay kind of where they are now. The high oil price case kind of has them jumping from where they had been a year ago at $100 to moving up fairly sharply all the way up to over $200 a barrel. If that range seems wide to you, and particularly to the upside, I would just remind you that we were at $150 a barrel in 2008, and there are plenty of geopolitical events that I'm sure you could come up with your own scenarios for how prices could go very high in a hurry. So I think the way to think about this is a stress test. This isn't a forecast for where prices are gonna go as much as it is. Let's take a look at the ranges that we think make some sense and then try to understand what that means across the energy data as the stress test cases against which you run the reference case. So let's take a look at what a difference the high oil and gas resource case or the low oil resource case makes, for example, in production. So in the reference case, production continues to climb out through 2020. We get up to about 11 million barrels a day. In the low oil price case, we get close to 10 and that begins to tail off. I think that the way I would describe the reference case is kind of a plateau. The low oil price case is a peak and decline. Under the high oil and gas resource case, production continues to rise throughout the forecast period. I imagine that this actually does a fairly decent job of capturing what I would think of the likely range of outcomes. We do believe in the reference case that production comes off a little bit after 2020. Some of that is the lower prices that we see in the near term part of the forecast, part of it is declining onshore field. So the normal production decline in the non-shale areas. Can I ask you a quick question? So on the high resource case, when you talk about no new policies, which is kind of what EIA does, right? In terms of technology improvements on either recovery rates or how do you get there? Yeah. So Frank, one thing to keep in mind is that's a high oil and gas resource case, not a high oil price case. And in the high oil and gas resource case, you get a lot of continuing growth in tight oil production. So better estimated all recovery numbers in the reservoirs, technology improvements and closer well spacings. And the possible addition of new areas, so beyond Eagle Ford, Permian, Nile Brower and Bakken, you get production coming somewhere. And Frank mentioned the word horizons. I would put that as a subset to the last comment that in the Permian basin, for example, the number of possible horizons that you could produce from are pretty strong. That one of the things that I think that we are still struggling with, and Frank, I think this is really good for everybody to keep in mind, is that the hardest thing I think of all of this to understand is the pace and opportunity for step change in technology. We've seen that happen before. And we build in improvements in technology into the modeling, but I think it is not easy to predict, and not easy is too gentle. I think it's impossible to predict the kinds of changes that could take place. This illustrates under the different cases that we examined some of the regional implications. So the regional variations in both domestic crude oil and dry natural gas production could lead to very significant shifts in where the oil and natural gas flows in the country. And what you see here is in the high oil and gas resource case, you get a lot more in the Dakotas and Rocky Mountains area, and that implies the need for transportation infrastructure to remove that oil to where refineries and or consumers are to pick it up. One of the things that I might mention is that we, I think it was it last week or two weeks ago, two weeks ago we launched our crude by rail data, and we are now at EIA on a monthly basis, tracking crude by rail movements in the US from region to region, as well as across the border to Canada, and that data is, I think, going to be very helpful for everybody who's interested in these kinds of issues to have a look at. On the natural gas, excuse me, gasoline side, I mentioned earlier that, and this shows tight oil production, you see the squeezing down of net petroleum and other liquids imports in that dark ink at the top, that comes from a combination of issues. Liquid fuels supply, two main sources, tight oil production, natural gas plant liquids production, natural gas plant liquids production grows from 2.6 million barrels a day in 2013 to four million barrels a day in 2019, so we're seeing a lot of growth in this very light end of the barrel. We will have more to say about where some of those light ends are gonna go in the refining system over the course of the next month or two as we publish the remainder of our oil export studies. Speaking of net imports, when that number goes negative, that means we're exporting. We become a net exporter of liquid fuels in the high oil and gas resource case, also in the high oil price case. In the reference case, it does come down over the next few years, but then kind of levels out. The reference case, net import share, which had been 60% of US consumption back in 2005 drops from a 33% number on that dividing line of where we start with the reference case of 2013, and by 2040, we're at about 17%. So the numbers kind of hang in that mid-teens level across the forecast period. I started off the last slide thinking that I was actually on this one, in the gasoline, in the transportation sector, motor gasoline use declines, diesel and jet fuel use, also natural gas use and transportation growing a little in this period. You see the top line is kind of flat to coming down. Total transportation delivered energy consumption holds at about 27 quadrillion BTUs across the period here. The interesting changes are that the motor gasoline bit down at the bottom of that graph is shrinking pretty rapidly while jet fuel and diesel continue to expand. If you think about the diesel area, because that's the one that's changing the most, it's really strong growth in heavy duty, vehicle miles traveled that are only offset a little bit by greenhouse gas and fuel consumption standards. On the net exports, there are three cases shown here. The reference case, the high oil and gas resource case and the low oil price case. Now remember that in the low oil price case, you don't get as much production. In the high oil and gas resource case, you get a lot of growth in production. If you assume that from that last slide, the consumption of liquid fuels is gonna be relatively flat. In a sense, what we're showing here is that product exports have to go up if you're not under the current law and regulation gonna be exporting that much crude oil. So what we're showing here is a very high growth in product exports under the high oil and gas resource case. The, we can come back to that in a bit. Let's go on to the natural gas slides. Here we're showing the price cases for natural gas. I think that the key takeaway here is that natural gas prices are gonna be very dependent on what assumptions you make about crude oil prices. The reference case, the Henry Hub natural gas spot price in rises from about $3 now to $3.69 or $4.88 rather in still under $5 in 2020, and then moves up into the high $7 number in constant dollars by the year 2040. That's driven by increased demand for both domestic and international markets, leading to more production. But at a certain point in time, but at a somewhat higher price in order to drive the resource base, the Henry Hub natural gas spot price is lowest, as you see there in red in the high oil and gas resource case, and highest in the high oil price case. The reference case and the low oil price case you get about the same amount of natural gas. The, on the production side, this is not a lot different. Then what we were showing in 2014, three big sources of future natural gas production, growth in order of importance, shale gas, tight gas, and Alaskan gas. The Alaskan gas is gonna be at least, is among the others up here is gonna be very dependent on what the oil price is, because the Alaskan gas is assumed to go into the foreign markets. One of the interesting things in this is that among the six largest shale plays, let me just list those for you, the Marcellus, Pennsylvania, Hainesville, the Texas-Lusiana border, Eagle Ford in Southwest Texas, the Barnett in Texas, the Utica in Eastern Ohio, and Fayetteville in Arkansas, I think, and Louisiana, I think across the border there. The Marcellus and Utica together will have cumulative production in our model that's greater than the combination of Hainesville, Eagle Ford, and Barnett over the forecast period. So the shift in gas, the center of gravity for natural gas production is really shifting east. And is it safe to say just under price sensitivity, right? So while the volume of gas under high price case, low price case stays the same, the areas from which it comes varies, right? Because liquid rich plays versus dry gas plays, so some benefit more than others. Yeah, we're getting down a level of detail. Yeah, one of the things that I think you could say is that what we're already seeing and how the rig count is being deployed is that the oil price is gonna make a big difference to what happens in the Hainesville and Fayetteville and probably Barnett. The consumption side of natural gas really driven, not exclusively by any means, but certainly the bulk of the growth and the majority of the growth in natural gas is coming out of electric power. There's also a pretty big increase in what happens in the industrial sector. Not so much in residential, which is declining as a function of better equipment, so more efficient equipment in homes, reducing space-eating needs, slower population growth, the combination of electric power use of natural gas and industrial use of natural gas that was gonna drive those numbers up pretty well, drooling down just a little bit into the industrial sector. Food, processing, bulk chemicals, refining, and kind of general manufacturing and metals smelting, big consumers of natural gas and providing a lot of the growth in this sector. I think it's worthwhile to think about this from the standpoint of what other than bulk chemicals is using natural gas because I think there's this tendency to think that gas is outside of the electric sector is gonna be consumed by people doing petrochemicals, but there's a lot of this going into other areas like food and metals that's pretty important. One of the key differences across the cases is how much natural gas is exported from the United States and that's gonna depend very much on what US natural gas prices are and what world energy prices are. Basically that spread kind of drives the economics of natural gas exports. In the reference case, we see those export numbers climbing, getting up into the mid-teens and billion cubic feet a day, high teens maybe by 2040. The projections change very dramatically depending on the high oil and gas resource case versus the low oil price case. Let's just think about the low oil price case for a second. With lower oil prices and the fact that in the global markets, natural gas tends to get priced at a BTU equivalent to the oil. The attractiveness of LNG from the US is diminished and we end up with a lot less gas. One of the interesting things is, is that it is really in the LNG area, not so much the pipeline exports to Mexico which continue at a somewhat lower rate but at a much greater rate than we have in the current situation. Under either of these cases, the low oil price case, you don't have the Alaskan gas coming in because global markets just don't wanna pay. For that, it also doesn't show up in the high oil and gas resource case and that's because the resources in the lower 48 States are more economic. Let's talk a little bit about electricity there. The graphic here shows growth all the way back to the 1950s. I think I've shown this before in presentations. Electricity use in the United States used to grow at a rate significantly greater than the annual growth rates in GDP or the economy. Then there was a period basically from the mid-70s out into the mid-90s when electricity growth was fairly well matched with GDP growth. You extend that out into the 2000, 2010 period and then in our view out into the future, we have electricity growing at rates significantly below GDP. In the box there on the upper right, you can see the average over the period from 2013 to 2040 for electricity consumption on an annual basis is a little under 1%, so eight-tenths of a percent per year against 2.4% growth in GDP. Four big factors that are driving that. First one is slowing population growth. Second one is market saturation of some of the key electricity using appliances, what would they be? Air conditioners, water heaters, stoves, dishwashers and so on. Improved efficiency of nearly all the equipment and appliances that are in place. They think about computers that you're using, they just simply take a lot less electric power to drive than what we've seen in the past. Things like light bulb standards and so on also play a role in this. The fourth thing is the overall shift in the economy to less energy-intensive industry. There's a lot of uncertainty in this, there's a lot of uncertainty in all of these forecasts. The efficiency standards for both lighting and appliances could put further downward pressure on these numbers, just as an example. There's a lot of progress that could be made in big industrial electric motors if the technology or regulatory incentives were there to do that. The electricity mix, looking at this over time, shifts to lower carbon options. I mentioned in my introductory remarks that renewables and natural gas taking the most market share in terms of generation. The share of total generation from renewables, excluding hydropower for just a second, grows from a little over 6% in 2013 to a little over 9% in 2025, and then hits 12% in 2040. So those numbers are going up fairly sharply. There are no net additional increases in coal generation, mainly as retirements offset some modest new plant additions. Similarly in nuclear power, the share of nuclear power in total generation, although it declines, the capacity is, which is about 99 gigawatts in 2013 is only, goes up, but is only 105 gigawatts in 2040. So we're getting very close to the end here. A couple of more slides to go. Let's talk about renewables in a little bit more detail. You see the growth in wind, solar, geothermal and biomass here, but particularly wind and solar. You see the crossover point between conventional hydroelectric power and the total in 2013. And by the very end of the forecast period, wind actually should be generating more electricity than conventional hydro power. If you look at the growth figures across the different cases, reference case against high oil prices, low oil prices, the resource case and the low and high economic growth cases, you get slightly different numbers of course in all of those, but growth in wind and solar generation are meeting a significant portion of the projected total electric load growth across all of these cases. So wind and solar, and keep in mind that this is using the EIA standard existing law and regulation. So even without the extension of some of the tax credits, for example, we expect wind and solar to do pretty well just simply on an economic choice basis. So Frank, that's basically it. The second advertising slide is where to go for more information. The annual energy outlook at the, near the top of this list is on our website now. That browser will enable you to look at a lot of the data and I hope you all have a chance to do that. And we will over the course of the next few days have today in energy articles highlighting some of the key features from the AEO. And if you are not getting the today in energy feed from EIA, I highly recommend it. One of the things that I think is great about the today in energy is that it will show you some of the highlights but give you links to allow you to drill down into more detail. So it's a very convenient way to learn about all of the things that were capable of analyzing at the Energy Information Administration. So Frank, back to you. Adam, thanks so much. Not surprisingly, it's always substantive and data rich when you come here. So while folks are absorbing what you said, let me just kind of kick off with two questions. So the first one is the interplay between the AEO and the IEO, right? So as you look on how this plays in international markets when you're talking about whether it's exports of crude oil or exports of natural gas, there's external events. What happens in Paris where we go with climate and emissions on refined products? Where would those products go if we shipped them out in the world when you look at refinery configurations? And I would draw your attention, I want to say two weeks ago now we did a refining and export session with Westfall from EIA, which was an excellent primer on refining. And since that time, you've actually put out one of your reports on what refiners could do to handle additional supplies of light-tight oil. But as you say, when you look at distillate demand as opposed to gasoline demand, that requires either new investments because the economics of the product shift, right? So it's not just the inputs, it's the outputs that you want to have economic products. When you look at matching up the two and it's good that you actually do these on alternate years, but the role of the AEO that frames the US position, there's got to be in the back of your mind, I guess the previous IEO, the international outlook, but things have been moving so quickly that putting your finger on where the international market is going and how the US market is developing in that context has to be a difficult task. Can you talk about that, the complexity of that a little bit? Sure, and it's not just what might happen in Paris. Right. I'm thinking about Geneva as well. The Iranian sanctions could make a huge difference to the oil price outlook, and it could go either way. I had an opportunity to speak with somebody this morning that knows an awful lot about the sanctions issues, and this is still in the negotiation stage, and I don't think we know the outcome yet. A lot of people are working very hard on it, but if we don't get a final deal, sanctions could get tighter. If there is a deal, ultimately, over time, sanctions would come off in the short-term energy outlook. We suggested that there's probably 700 or 800,000 barrels a day of Iranian oil that you can come back onto the markets fairly quickly, and that could make a $5, $15 to $15 difference in oil prices back to Paris on negotiations on climate. That obviously could make some difference too in the overall global context. There's plenty of things. One of the other geopolitical issues, Frank, that we remain, I think, concerned about is the possibility that oil production could be lost in some countries who are suffering from low oil prices. Venezuela comes to mind. Nigeria and others that could have big social issues associated with lack of revenue flow. So there are a lot of things like that out there. One of the others, it seems really easy to talk about the energy outlook and particularly the oil outlook on the supply side because we're used to supply being a big driver, but there were and supply coming out of Libya, so an increase in supply last summer I think had a lot to do with lower oil prices, but there were two other big events last summer that are very, very difficult to pin down. And one was the bottoming out and rapid rise in the value of the US dollar against other currencies. Maybe that currency effect was a signal that the US economy was doing pretty well relative to other economies and particularly the Chinese economy. So I come back to the demand side. One of the interesting things that we will try to look at very, very carefully in the international energy outlook is demand in China, especially for transportation. And that's gonna be something that I think that we will pay a lot of attention to and I hope others will as well because the amount of information on that outlook, I think is kind of thin. So what we've been trying to do, so the international energy outlook this year, so towards later this year we'll have the IEO out and this will be the full version of the IEO that'll include all energy. And frankly we will to be specific on the interaction between the IEO. We now have a oil price path in a reference oil price path and we have the US reference production and consumption and import, export numbers in there and that'll provide the basis for at least those inputs into the calibrating the international outlook. So the one other piece since obviously the near term affects the longer term when you go out to 2030 or 2040, this notion of the amount of oil that's going into storage if demand doesn't resurface, right? And so there's been a discussion about above ground storage versus and we're getting a little off track from the IEO but it's a common situation that you're running into now and the notion that some producers are storing oil in the borehole and with quick cycle time they're able to case the well but not complete the well but if you cycle that back on, the analogy that we've used here is the busboy, they're opportunistic and when you see that the glass is half full all of a sudden you'll fill it back up, you keep prices depressed. So as you move through 2015, the price outlook is you have a number of different price paths but is there one that's way to average more realistic than others? So one of the things that we now have at EIA that I think is very useful in trying to understand this is the drilling productivity report and that's down at the very bottom of this list. I don't remember if I told this story before here so I apologize ahead of time if I'm boring people. When I got the EIA, we published the annual energy outlook. It was keyed for 2013, it was keyed to 2011, was it? John, I think and the growth in light-tight oil production between 2011 and 2012, 13 was a lot more than we had actually in the AEO. So that by the time we got to January, our AEO forecast for 2013 and 14 was actually below what was happening. One of the things that we've been spending a lot of time on at EIA is in a sense benchmarking the start of the annual energy outlook to our short-term energy outlook so that we can start from a better place. What I said, we have people that work very, very hard at EIA to get things right. We're in the forecasting business. You're gonna be wrong. So throughout my career, I've said I've been wrong a lot of times but I try not to be wrong quickly. Okay, we're streaming right now. So we now have, through the Drilling Productivity Report, a really great way to help benchmark the both the short-term energy outlook and the annual energy outlook to each other with a pretty good idea of production. One of the interesting things is the DPR, which is out now for the month of May, suggests that there are declines taking place in crude oil production in the shale plays in the Bakken, Eagle Ford, and Nile Brara. I'm not sure, last month, the Permian was still up a little bit but I think even the Permian is now under pressure. So that's a, that suggests to us that with a little bit of help on the demand side, coming from combination of economic growth, employment growth, and the drop in prices might offset in the near term, in the short term. So for 2015 and maybe early 2016, some of the structural declines in gasoline consumption in the US and so we would see more demand and a little bit higher back to the benchmarking idea. We're trying to kind of extend this across fuels and other parts of the AEO so that we can use the best available information that we have beyond, when you saw those dividing lines we're starting with 2013 as a base but trust me, we're trying to be very careful about making sure that the 14 and 15 numbers where we're beginning from are accurate. Okay, and then one other quick question before we open it up. So you talked about the various studies that... Hold on a second. Okay. Inventories, cushing, is cushing gonna get completely full and drive the price of oil down to zero? We actually had a couple of today in energy articles on gas, crude oil, storage numbers. I think the answer is, it is full, it's growing but there are lots of different things that can happen to storage as cushing fills up the spreads between cushing and the Gulf Coast will change. That might enable some of that oil to flow south and there's more storage available in the Gulf Coast and coming back to the drilling productivity report, it does look like U.S. production is starting to flatten out. That should help slow down the build in storage and finally we are now out of the refinery maintenance season getting into the full blown summer production output in refinery season and that should help absorb some of the flow of crude oil. So we'll see how all of that works out but I think it's probably too, it's oversimplified to just simply look at cushing and assume that the trend in cushing is gonna tell you everything that you need to know about the short term oil price. Well, and that's one of the questions that, so the complexity of logistics and the timing when the U.S. was a highly import dependent in the Gulf Coast, you would schedule deliveries of tankers, right? So you actually store it on tanker and if you didn't want it February 6th you schedule it for delivery February 20th. If it's coming out of the ground, coming down the pipe then it's gotta go somewhere and so in refinery maintenance season when refineries aren't buying, you have to find home for it, right? And it's distressed. The other question since you, the export studies, so the timing of the next round of EIA studies, the refining studies. I think we'll have everything done by June. There are three more export studies to go. So we've done quite a few. I mean, a year ago we had the first light tight oil production growth projections. As part of the AEO, there are some new forecasts now for light tight oil production and we will expand on that and do it in more detail over the course of the next month or two. So that'll be one of the three to come. You mentioned the study that we just did a few weeks ago on what could refiners do and we're gonna have a study out that we'll look at what we think refiners would do. Would actually do. Right. There's what you could do and then there's what you would do given the economics and so on. The final one, I think in June, I hope early June, will involve the impact on prices, production and trade if you have constraints on crude oil exports as we do now sort of the reference case or if you were to relax those constraints. How does that change the outlook? So we'll, and I think that'll be, I'm reluctant to say that'll be the end because I have a feeling that this is gonna be a continuing discussion and debate in Washington. Excellent. Okay, so as we open this up for questions, we have three simple rules here. Those of you who have been here before understand what they are. It's to wait for the microphone when we have large rooms. Identify yourself and your affiliation and to the extent you wanna make a comment, they're always welcome but if you'll put your question in the form of a question, it always helps us out as well. So we'll start in the back. Bob McNally with the rapid end group. First, congratulations Adam to you and the EIA for another outstanding piece of work and for all the work you've done to modernize and deepen the energy data and present it on the website. So just to start with a comment of congratulations. And would you, you know, like in car talk, would you please avow that I didn't ask you to say that? Yeah, that's right, that's right. I want my $20 after the talk, so. My question has to do with what you think the implication is of Saudi Arabia standing back and saying we're no longer going to balance the market for you. You have a price path in the outlook but when you think about the amplitude of the range or the volatility in prices, what does it mean going forward if Saudi Arabia is really gonna sort of hang up its hat? How long do you think it will do so? Thank you. So I think that the answer to what the Saudis will do is probably best answered by the Saudis themselves rather than me. I will say that oil minister Naimi has said that the Saudis would not act alone to try to balance the global markets. And I think that there's wisdom in that. I think what the Saudis have said in many venues is that the experience that they had in the 1980s when demand was weak and supply was strong was one that they do not want to repeat where they were the only country that was really trying to reduce production order to balance the markets. So could Saudi Arabia acting with other key players, Iraq, Iran, maybe Russia, Nigeria, Venezuela, the normal players in the global markets would it work? What will be the path of US shale oil production is another important aspect in that. I think that the way I like to think of this, Bob, is that we ran a really interesting experiment in oil supply elasticity with respect to price. And what we discovered was at $100 a barrel, you get a lot of supply. And not enough demand. The US alone, there's one graphic that's gonna be on the website out of the annual energy outlook that shows the growth and it's part of the steel, I think as well too, and the steel numbers. The US production alone grew faster than world demand grew in 2014. That simply wasn't sustainable and something had to give. And I think the Saudis recognize that. And so the rebalancing is gonna take place on the supply side from a lot of different sources and on the demand side as well. I wanted to say before we get into the other questions, how much I appreciate the work of Paul Holberg who has been doing a lot of the forecasting, driving EIA towards getting this done in a timely manner. And Paul, thank you for your efforts along those lines and the entire staff, John Conte's group, John Conte, the assistant administrator for energy analysis at EIA. So I'd like to actually give Paul and John a hand. And just to add on to Bob's point, the notion, one of the differences between now and the 80s was the opportunity pool and the number of prospective suppliers that are out there, right? There's a different group, bigger group now than we've had before. So for any one country or small group of countries, it's gonna make it really hard. You know, we might have another crack at something. Where is Howard Grinspect here? Where's Howard? Howard, are you there? Howard's in the back. The international energy outlook that we produced in 2013 had a two-page box in it that talked about growth in world oil demand over the forecast period to 2040. And it talked about how much was left for non-OPEC producers. And within the non-OPEC producers, how much was left for Iran, Iraq, and Saudi Arabia. So Bob, back to your question. And what, you know, in this analysis that Howard spent some really serious time thinking about was what we found essentially was that if you had success in Iraq and a recovery in Iran, that the Saudis would be driven to very low production levels in order to try to balance the market for crude oil. And I guess, I mean, I don't know if we, I'd have to go back and look at this again to see whether we said it explicitly, but it was this is not gonna be easy to do. And as a consequence, you know, something might have to happen. I feel in a, to a certain extent that we had an inkling of what actually happened at the end of 2014 and 15 in the oil markets. It's just that we thought it was after 2025, but it came true a lot faster and probably because of this enormous growth in shale production in the U.S. That was great. She waited for the microphone. Anya Grigas, Trim and National Security Project. I wanted to ask you on your view on American LNG exports to Europe, whether you think they will be commercially viable and whether the volumes would be sufficient to have an impact on Europe's dependency on Russia. So I know this is projections, but perhaps we can offer your thoughts. Normally what I would do is I would call on some of the people who have done that work at EIA to talk about the details. Angelina LaRose, who would really be able to fill you in on all of the details of that is overseas right now, explaining that question to an LNG conference in Europe. I think in general that the answer that Angelina would have given had she been here today would be that in general, the more likely market for U.S. LNG exports is in Asia, not Europe, just because of the prices, but that markets do shift around and a lot of this is really not up to the United States. We often hear the question is, could the United States use LNG exports as a foreign policy tool? The U.S. doesn't own any LNG. So is the U.S. stopping the export of LNG? No, the Federal LNG Regulatory Commission on the engineering and safety side and the Department of Energy Fossil Energy Office on the national interest permit side have granted more permits actually than in our low oil price case are gonna be used. So I mean that leads to some interesting questions, but in general, could exports of energy, whether that's petroleum products, crude oil, condensate, natural gas in the form of LNG or pipeline exports to Mexico, will they make a difference to the global balances? Yes, and does that have geopolitical consequences? Yes, in a sense, I think you could say Europe might be better off even if U.S. exports of LNG were to go to Asia simply because there would be more natural gas on the global markets. EIA has twice looked at the question of what the impact on domestic prices would be of levels of LNG exports, and you could go to the web and find those studies. In general, we do think that it could tend to cause domestic natural gas prices to be a little bit higher, but it's relatively modest in the pricing outlook. It's the increase in LNG prices that comes and natural gas prices that comes from LNG exports is probably smaller than the air range in the forecast itself. Thank you. That's the reason she's so large. No, thank you. My name is Jim Moore. I'm with the Le Clea Group gas distributor in St. Louis, Kansas City in Birmingham. So bring it back domestic. Thank you for the numbers. I use them all the time. I really appreciate it. And I was looking at the difference. My question involves the price of natural gas and electricity to residential consumers in the United States. And I had some problems with the numbers. So I went back to 1998. I would have gone back further, but 97 you used the Lotus 123 and I can't open that anymore. So I'd encourage you to translate the old files if you could. But I looked at the electricity forecast and almost every single year you've under forecast the actual price. So you've had to adjust the curve up every single, not every year, but almost every year. Natural gas, on the other hand, for the past 10 years, almost every year you'd have had to shift the curve down. Again, on the forecast, if you look out, you're escalating in electricity at a much lower rate than gas. So my question is, do you look at your older forecast and try to reconcile them and will you look to improve that in the future? Thank you. Well, in general, we do. In fact, somewhere on our website, and it'll be part of the full version of the annual energy outlook, we go through an analysis of how we did. I think the answer to why natural gas prices are lower is that the supply of gas coming from the shale formations has just surprised us, along with most of the other people who have been involved in this. On the electricity side, I don't know, I'm looking around for electricity people here, but John Connick, go ahead, John, why don't you? I didn't think it was that bad, but does that work? I'll sit down and see. So we have been looking at this for a number of years and it's not traditionally in the generation aspect of it, but it's more in the T and D aspect of it. There's been greater charges associated with electricity price than we were estimating. And we have looked at it, we're gonna continue to look at it, but I think we've made improvements in every year. And we think, of course, we're right this time. This time I waited for the microphone. Hi, Tom O'Donnell, I do energy and international affairs, I'm based in Berlin now. I should say I'm here as a fellow of the American Institute of Contemporary German Studies to study American opinions about what's going on in Europe and Germany on energy. So the woman in the front took my question, so I have another question. And that's to do with, there's a lot of talk in, well, Germany and Europe in general, because of the direction things have gone with renewables, the energy vendor in Germany, there's a very high price. And of course, business is worried about this. And okay, they're biting the bullet for some years and they'll have all the technology, but meanwhile, you know what happened to the price and the supply in the United States, so they're really stuck. So there's a lot of discussion, both from this side and that side, about investments of energy-intensive industries in the United States, actually German industries, but others. I think they have like 40% in Europe and I don't know, we have 10 or 15%. How much is that, in your opinion, real that move towards the United States, both bringing things home and others investing here because of that? Well, it's probably electricity is one area. Another one is natural gas. There are a lot of stories about petrochemical manufacturers wanting to come back to the United States to take advantage of lower natural gas prices in the US relative to global markets. And I think that it's also possible that that's one of the factors in the crude oil export debate in the sense that some domestic refiners are able to take advantage of lower domestic crude oil prices to sell products into the global markets. That all of those things are big, complicated trade issues. And whether that alone is enough to make a difference to the decision as to whether you come back or not, I think, is worth examining. There are lots of other regulatory issues and labor issues that might go the other way compared to the cost of natural resources. So I don't think that there's an easy answer to your question. There certainly is a lot of anecdotal evidence, though, that low energy prices have been a fairly significant driver of GDP growth in the US since 2008. I've been solicitor. So echoing congratulations to you and John, Paul, everybody on your team. This is a phenomenal piece of work. It gets better every year. So people who look at natural gas markets closely, and this brings it back to a regional continental base, but not totally, see a couple of things. We see a rash of contracts for LNG indexing Henry Hub, which is okay, that's what they want to do. Then we look at Henry Hub and we see that liquidity is absolutely nose diving, that there's very little liquidity during certain times of the year and increasingly so. At Henry Hub, and while there's an increase in liquidity in some of the high producing regions, particularly in the Marcellus, Dominion and some others. I notice there's some regional, there's some regional, there's kind of a regional gas forecast as part of the model, but I don't see it really highlighted. I think there's only three or four or five regions that are included. Do you have plans to try to pick up on some of the regionality we see in some other models, like the old North American regional gas model, rural gas trade? Better, there we go, now it's working. Okay, it's working, something's working. Regional differences in the model. So one of the things, I think it's a great question, Ben. It's on our priority list for the fiscal year 2016 to do a deeper dive into regional production transportation and use across the entire suite of products from EIA. We made a start at that with the crew by rail transportation statistics just as an example. We had fairly big error terms in the difference between production and refinery use of crude oil in some of the PADD, the pad districts, these are the regional way that patrolling them is usually divided up. And with the addition of data that we're now getting on on crude by rail, the error terms in our regional supply and demand balances have dramatically diminished come in. So that's one way that we can do that. Will we have better data on the production side? I think we will have a lot more information on a regional basis because we now have permission and are in the process of starting our first collection of new oil and gas production numbers in something we call the 914 survey. This was something that started more than a decade ago at EIA to look at natural gas production on a more timely basis. And we received permission from OMB to begin to do two things to collect oil production that on the same basis, including its API gravity characteristics and to extend the number of states from I think five to 15, including the Gulf of Mexico in both cases, so that we will be capturing oil production in North Dakota and natural gas production in Pennsylvania and Ohio just as examples in regional output. I think we have some work underway to look at some of the regional refining issues and our regional refining models I think are gonna be improved. So there's lots of places where we can do that. One of the other things that we're looking for ways to improve our data collection is in the electricity area. We will also this year be starting an hourly data sweep in a sense of electricity generation. So an hourly generation of electricity database that's gonna be available to everybody to look at it that comes to the IA website. The reason I bring that up is if you wanna know how renewables are really being used on the grid having hourly data is critical. And being able to look at that just as an example will then raise other issues. How much solar is installed on rooftops and how is that playing into the electricity generation area and we're planning on trying to find some creative ways to measure the amount of generation that we think is occurring on rooftops. Very hard to do now and you would think that that would be, it sounds like something that ought to be really easy but when you look into it, it turns out to be really hard. I think in general that the deeper the dive you do into regional issues, the more complex the analysis. I mean, in some ways it gives you a much more accurate view of things but it takes more time, it takes more resources and we have to, like everybody, we have to prioritize what we're gonna spend our money on so we won't be able to do it all but it's on our priority list. Yeah, because the sequencing of dispatch is important to see what's peak versus base load at different times. Go ahead. Now I was just gonna say that the sequencing of the dispatch as you know is what's really important when you have the base load versus the peak load. All right, we're gonna take two other questions, quick questions, we'll give them both to Adam at the same time, we'll take one in the corner over here and then we'll go to the far corner over there. Hi, my name is Andrew Miller, I'm an intern with the Biotech Biomass Thermal Energy Council and I was very heartened that you mentioned heating in your presentation because it's often overlooked. I just wanted to ask, you mentioned that you saw it, I believe you mentioned that you saw it declining as a percentage of overall US energy consumption. Some of the reasons why and is this because of a new use of technology, is it developments in CHP and where do you think that's going? Thank you. I think that the story there is probably similar to what's going on in gasoline, that different regulations in the heating area and just simply decisions that consumers are making on their own behalf about how much insulation they put in their homes, what kind of window treatment they have, the efficiency of natural gas, furnaces, all of those things, for example, I think make a really big difference on the oil side. There's still a lot of oil being used in home heating in the Northeast. There's a lot of propane being used out in the Midwest, how those appliances consume energy, the growth rate in the housing stock, the fact that from a behavioral standpoint, people, for some period of time, we were moving towards more and more square footage in houses and it now looks like that trend is shifted. So I think all that's contributing to that move. Okay, and we have two folks here in the back side by side and so I don't have to make the call. You can both ask your question and Adam can pick which one he wants to answer. Thank you, my name is Stephanie. I'm an energy reporter for Argus Media. I had two questions. One, when you mentioned the EPA Clean Power Plan that you might release a report in May, the rule's supposed to be finalized in June so I just wanted to know if you can give some color on what you might release and if the rule's final month later. And the second thing is on oil exports and the high oil price scenario case. Do you think that the exports can be met if we have to lift, does it require lifting the export ban? Did you have any thoughts on that? Okay, and then we'll go right next. Thank you, Davis Burroughs. I'm also an energy reporter with Morning Consult. Question is a little more open-ended. It concerns the import-export ratio. So you project that within the next decade, you said it's a realistic possibility that the United States could become a net energy exporter. So my question is first, how does that defer from previous EIA projections? And second is how much does that really matter? Do you think the crossing that threshold is more of a symbolic achievement or does that really hold a lot of political and economic weight as it relates to changing the discussion on U.S. energy policy? I mean, 90% self-sufficient. Okay, let's start with that one and we'll work backwards. On the issue of this being a net energy exporter or net oil exporter, symbolic or real in terms of its impact, I think certainly the growth in production and how much of that can be met, how that growth in production across the board in all energy has a lot to do with GDP. So income, creation, and that's certainly real. So the more things that we can produce domestically, I think the greater the impacts are on GDP does being a net zero importer of oil completely change the foreign policy positions of the U.S. in many different areas. I would say probably not the U.S. anybody, even if we were exporting a net exporter of oil, the U.S. would still be part of the global patrolling of markets and big price increases or price decreases would affect the U.S. in the same way that it would affect other players. So there are certainly economic effects that would be positive from growing our production. But whether that means that we are no longer interested in what's happening in the rest of the world as far as oil or energy is concerned is probably not true. I think that kind of gets to the second, the export issue that was raised by the first questioner on EPA 111D stay tuned. We will have that report out in May and in time for the Congress and other policy makers to think about the issues and EPA itself in the run up to implementation. So in terms of what's gonna be in there, we're gonna try to cover the issues. So we'll look at the economics, we'll look at the implications for fuels, but I don't have anything more to say about that until we put the report out. Because EIA informs the policy debate. We don't wanna become the policy debate. So one of the reasons that we get folks like Adam to come here and join us for these kind of discussions that we try to keep it on schedule because we know that they're busy. But thank you all for your questions. This has been an informative discussion and join me please in thanking Adam Sminsky for coming with us today. Thank you. Oh, it's a pleasure. Thank you very much.