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<br /> <br />- - - <br /> <br />strategy. When the ground water is exhausted by this process, the lP model <br />automatically reverts to dryland farming (water available for irrigation is <br />constrained to zero) except in Strategy Five. where imported surface water <br />becomes available under specified policies. <br /> <br />Projections of primary energy commodity prices were required in order to <br />determine the value of future crude oil and natural gas production in the <br />Study area. Projections were also required of end-use energy commodity <br />prices for use in the lP farm enterprise models [3]-. Black & Veatch <br />developed d consistent set of primary energy commodity and end-use energy <br />commodity price projections for the Study. The projections and the method- <br />ologies used to make the projections are documented in the 8-8 report. <br /> <br />The methodology developed for making the price projections is schemati- <br />cally illustrated in Figure 2. The methodology attempts to maintain a long- <br />term perspective with regard to relative price changes and product pricing <br />relationships while accounting for recent events judged to have permanently <br />altered the long-term price trends. The potential of recent federal energy <br />legislation and new energy supply technologies to affect energy commodity <br />prices was evaluated, and a review of the permanence and impact of long-term <br />energy supply contracts was made. These assessments were considered in <br />developing the three separate sets of price projections: (1) primary <br />energy commodity prices, (2) petroleum and natural gas product prices, and <br />(3) electricity prices. Table 1 summarizes the projections; the principal <br />considerations for each set of projections are briefly discussed in the <br />following paragraphs. <br /> <br />Projections of wellhead crude oil and natural gas prices and coal prices <br />f.o.b. mine were made using the long-term price trend of crude oil and coal. <br />Based On the historical price trends shown in Figure 3, the future price of <br />crude oil was projected based on current (March 1980) world crude oil prices <br />and taking into account the decontrol of domestic crude oil prices by 1985. <br />Wellhead natural gas prices were projected using the crude oil price projec- <br />tions and assuming realization of the intent of the Natural Gas Policy Act <br />of 1978. <br /> <br />.. See Figure 1. <br /> <br />A-7 <br />