The Reference case—which serves as a basis against which alternative cases and policies to be detailed in the complete AEO2013 to be released next spring can be compared—generally assumes that current laws and regulations affecting the energy sector remain unchanged throughout the projection (including the implication that laws that include sunset dates do, in fact, end at the time of those sunset dates).

Many of the additional cases will reflect the impacts of extending a variety of current energy programs beyond their current expiration dates and the permanent retention of a broad set of programs that currently are subject to sunset provisions.

Increased sales for hybrids and PHEVs. The AEO2013 reference case projects delivered energy consumption in the transportation sector to remain relatively constant at about 27 quadrillion Btu from 2011 to 2040. Energy consumption by LDVs (including commercial light trucks) declines in the Reference case, from 16.1 quadrillion Btu in 2011 to 14.0 quadrillion Btu in 2025, due to incorporation of the model year 2017 to 2025 GHG and CAFE standards for LDVs.

Despite the projected increase in LDV miles traveled, energy consumption for LDVs further decreases after 2025, to 13.0 quadrillion Btu in 2035, as a result of fuel economy improvements achieved through stock turnover as older, less efficient vehicles are replaced by newer, more fuel-efficient vehicles. Beyond 2035, LDV energy demand begins to level off as increases in travel demand begin to exceed fuel economy improvements in the vehicle stock.

Projected sales of alternative-fuel vehicles in the AEO2013 Reference case are lower than in AEO2012, with the majority of the reduction reflected in sales of flex-fuel vehicles (FFVs), which in 2035 are about 1.3 million, or less than one-half the 2.9 million FFV sales in the AEO2012 Reference case.

Sales of battery-powered electric vehicles are 65% lower in the AEO2013 Reference case than the year before, with annual sales in 2035 estimated to be about 119,000. Reductions in battery electric vehicles are offset by increased sales of hybrid and plug-in hybrid vehicles, which grow to about 1.3 million vehicles in 203—about 20% higher than in the AEO2012 Reference case.

Continued fuel economy improvement in vehicles using other alternative fuels, gasoline, and diesel, combined with growth in the use of hybrid technologies (including micro, mild, full, and plug-in hybrid vehicles), limit the use of electric vehicles over the projection. Although about one-half of new LDV sales in 2040 use diesel, alternative fuels, or hybrid technology, only a small share, less than 1%, are all-electric.

Overall findings. AEO2013 offers a number of other key findings, including:

• Crude oil production, especially from tight oil plays, rises sharply over the next decade. Domestic oil production will rise to 7.5 million barrels per day (bpd) in 2019, up from less than 6 million bpd in 2011.

• Motor gasoline consumption will be less than previously estimated. Compared with the last AEO, the AEO2013 shows lower gasoline use, reflecting the introduction of more stringent corporate average fuel economy (CAFE) standards. Growth in diesel fuel consumption will be moderated by the increased use of natural gas in heavy-duty vehicles.

• The United States becomes a net exporter of natural gas earlier than estimated a year ago. Because quickly rising natural gas production outpaces domestic consumption, the United States will become a net exporter of liquefied natural gas (LNG) in 2016 and a net exporter of total natural gas (including via pipelines) in 2020.

• Renewable fuel use grows at a much faster rate than fossil fuel use. The share of electricity generation from renewables grows to 16% in 2040 from 13% in 2011. Biomass and biofuels growth is slower than in AEO2012. Biofuels grow at a slower rate due to lower crude oil prices and slower growth in E85 sales.

• Net imports of energy decline. The decline reflects increased domestic production of both petroleum and natural gas, increased use of biofuels, and lower demand resulting from the adoption of new vehicle fuel efficiency standards and rising energy prices. The net import share of total US energy consumption falls to 9% in 2040 from 19% in 2011.

• US energy-related carbon dioxide emissions remain more than 5% below their 2005 level through 2040, reflecting increased efficiency and the shift to a less carbon-intensive fuel mix.

Other AEO2013 Reference case highlights include:

• The Brent spot crude oil price declines from $111 per barrel (in 2011 dollars) in 2011 to $96 per barrel in 2015. After 2015, the Brent price increases, reaching $163 per barrel in 2040, as growing demand leads to the development of more costly resources. World liquids consumption grows from 88 million bpd in 2011 to 113 million bpd in 2040, driven by demand in China, India, Brazil, and other developing economies.

• Energy use per 2005 dollar of gross domestic product (GDP) declines by 46% from 2011 to 2040 in AEO2013 as a result of a continued shift from manufacturing to services (and, even within manufacturing, to less energy-intensive manufacturing industries), rising energy prices, and the adoption of policies that promote energy efficiency. CO₂ emissions per 2005 dollar of GDP have historically tracked closely with energy use per dollar of GDP. In the AEO2013 Reference case, however, as lower carbon fuels account for a bigger share of total energy use, CO₂ emissions per 2005 dollar of GDP decline more rapidly than energy use per 2005 dollar of GDP, falling by 56 percent from 2005 to 2040, at an annual rate of 2.3%.

• Net imports of energy decline both in absolute terms and as a share of total US energy consumption. The decline in energy imports reflects increased domestic petroleum and natural gas production, increased use of biofuels, and lower demand resulting from rising energy prices and the adoption of new efficiency standards for vehicles. The net import share of total US energy consumption is 9% in 2040, compared with 19% in 2011. (The share was 29% in 2007.)

Changes to Reference case. The Reference case incorporates a number of key changes, including:

• Extension of the projection period through 2040, an additional five years beyond AEO2012.

• Adoption of a new Liquid Fuels Market Module (LFMM) in place of the Petroleum Market Module used in earlier AEOs; this provides for more granular and integrated modeling of petroleum refineries and all other types of current and potential future liquid fuels production technologies. This allows more direct analysis and modeling of the regional supply and demand effects involving crude oil and other feedstocks, current and future processes, and marketing to consumers.

• A shift to the use of Brent spot price as the reference oil price. AEO2013 also presents the average West Texas Intermediate (WTI) spot price of light, low-sulfur crude oil delivered in Cushing, Oklahoma, and includes the U.S. annual average refiners' acquisition cost of imported crude oil, which is more representative of the average cost of all crude oils used by domestic refiners.

• A shift from using regional natural gas wellhead prices to using representative regional natural gas spot prices as the basis of the natural gas supply price. Due to this change, the methodology for estimating the Henry Hub price was revised.

• Updated handling of data on flex-fuel vehicles (FFVs) to better reflect consumer preferences and industry response. FFVs are necessary to meet the Renewable Fuels Standard (RFS), but the phasing out of CAFE credits for their sale and limited demand from consumers reduce their market penetration.

• A revised outlook for industrial production to reflect the impacts of increased shale gas production and lower natural gas prices, which result in faster growth for industrial production and energy consumption. The industries affected include, in particular, bulk chemicals and primary metals.

• Incorporation of a new aluminum process flow model in the industrial sector, which allows for diffusion of technologies through choices made among known commercial and emerging technologies based on relative capital costs and fuel expenditures and provides for a more realistic representation of the evolution of energy consumption than in previous AEOs.

• An enhanced industrial chemical model, in several respects: the baseline liquefied petroleum gas (LPG) feedstock data have been aligned with 2006 survey data; use of an updated propane-pricing mechanism that reflects natural gas price influences in order to allow for price competition between LPG feedstock and petroleum-based (naphtha) feedstock; and specific accounting in the Industrial Demand Model for propylene supplied by the LFMM.

• Updated handling of the US Environmental Protection Agency’s (EPA) National Emissions Standards for Hazardous Air Pollutants for industrial boilers and process heaters to address the maximum degree of emissions reduction using maximum achievable control technology. An industrial capital expenditure and fuel price adjustment for coal and residual fuel has been applied to reflect risk perception about the use of those fuels relative to natural gas.

• Augmentation of the construction and mining models in the Industrial Demand Model to better reflect AEO2013 assumptions regarding energy efficiencies in off-road vehicles and buildings, as well as the productivity of coal, oil, and natural gas extraction.

• Adoption of final model year 2017 to 2025 GHG emissions and CAFE standards for LDVs, which increases the projected fuel economy of new LDVs to 47.3 mpg in 2025.

• Updated handling of the representation of purchase decisions for alternative fuels for heavy-duty vehicles. Market factors used to calculate the relative cost of alternative-fuel vehicles, specifically natural gas, now represent first buyer-user behavior and slightly longer break-even payback periods, significantly increasing the demand for natural gas fuel in heavy trucks.

• Updated modeling of LNG export potential, which includes a rudimentary assessment of pricing of natural gas in international markets.

• Updated power generation unit costs that capture recent cost declines for some renewable technologies, which tend to lead to greater use of renewable generation, particularly solar technologies.

• Reinstatement of the Clean Air Interstate Rule (CAIR) after the court’s announcement of intent to vacate the Cross-State Air Pollution Rule (CSAPR).

• Modeling of California’s Assembly Bill 32, the Global Warming Solutions Act (AB 32), that allows for representation of a cap-and-trade program developed as part of California’s GHG reduction goals for 2020. The coordinated regulations include an enforceable GHG cap that will decline over time. AEO2013 reflects all covered sectors, including emissions offsets and allowance allocations.

• Incorporation of the California Low Carbon Fuel Standard, which requires fuel producers and importers who sell motor gasoline or diesel fuel in California to reduce the carbon intensity of those fuels by 10% between 2012 and 2020 through the increased sale of alternative low-carbon fuels.