EIA Forecasts Lower Oil Prices; Continued Decline in Alaska Oil Production

The Energy Information Administration (EIA) released their September 2011 Short Term Energy Outlook. Compared to the August report, the EIA "substantially lowered" their outlook on the U.S. economy, resulting in lower growth in petroleum demand and prices increasing to $103 per barrel by 2012, down from the $107 per barrel forecast in the August report.

The report forecasts that Alaska oil supply (production) will decrease from an average of 600,000 barrels per day in 2010 to 520,000 barrels per day for 2012, and oil from Alaska will decline from 11% of domestic production in 2010 to 9% of domestic production for 2012.

The EIA report notes that oil prices are subject to "inherent uncertainty," with upside risks that would increase oil prices - unrest in oil-producing regions and more robust demand than forecast - balanced by downside risks that would reduce oil prices - continued global economic weakening and the possibility that Libya's oil production and exports will resume sooner than forecast.