Energy and Power

OPEC likely to increase its production going forward

In the second quarter of 2009, the Organization of the Petroleum Exporting Countries (OPEC) crude oil production was 28.7 million bbl/d. Although production was similar to the first-quarter levels, it witnessed a drop of 3 million bbl/d from peak production in the third quarter of 2008. High prices for crude oil, coupled with OPEC’s historic tendency for weaker compliance with production targets, may result in OPEC increasing its production for the remainder of year. OPEC’s crude oil production is expected to reach 29.3 million bbl/d in the second half of 2009, before falling to 29.2 bbl/d in 2010.

Electricity prices to rise gradually, after moderating in the near term

U.S. electricity prices in real terms (in 2007 dollars) have sharply increased in the recent years, driven by escalating fuel and capital costs. Also, the restructuring initiatives that restrict price increases have come to an end. In the near-term, electricity prices are expected to fall with a decline in fuel prices, triggered by the economic slowdown. However, once the economy shows recovery next year, real electricity prices may stabilize at 9 cents per kilowatt-hour in 2010 and remain at that level for the next few years. During this period, fuel prices are likely to remain low as a number of new coal and natural gas-fired plants come onstream. From 2015 onwards, there would be an increase in fuel prices due to growing demand and new capacity requirements, and this in turn would lead to a gradual increase in real electricity prices. The EIA expects real retail electricity prices to reach 10.4 cents per kilowatt-hour in 2030.