WASHINGTON (AP) – While the recent flurry of record oil prices may be temporary, government analysts said Thursday that $30-a-barrel oil should be expected for decades to come.
Crude is likely to cost about $35 a barrel in 2025, an increase that is nearly a third higher than predicted a few years ago, according to a long-term energy outlook report issued by the federal Energy Information Administration.
Guy Caruso, the agency’s director, acknowledged that long-term predictions for energy prices 20 years into the future are difficult and subject to change should there be unexpected global events that might affect oil supply or demand.
The agency’s forecast is largely dependent on current assumptions about future oil production and expected economic growth which will determine the intensity of demand for oil and other energy sources.
The forecasts estimate that world oil production will grow from about 80 million barrels a day to 120 million barrels a day in 2025.
But the report estimates that neither U.S. production, nor consumption will change dramatically over the next 20 years and that U.S. refineries will increasingly have to depend on imported crude.
The higher prices, estimated at $31 a barrel in 2010 and $35 a barrel in 2025 – not accounting for general inflation – are not expected to be high enough to force a significant decline in demand, the forecast said.
Increased conservation and improvements in efficiency are likely to be largely nullified by increased demand because of economic growth, said the report. It said U.S. demand for petroleum products in 2025 is expected to be 2 percent less than it is today.
The EIA estimated that domestic oil production would increase about 6 percent by 2025 and that the country “is expected to become increasingly dependent on imports” which by then will account for two-thirds of the oil consumed, up from the current 56 percent.
Oil prices, which have been more than $40 a barrel for much of the last seven months and peaked in October at more than $55 a barrel, again moved higher on Thursday, topping $42 a barrel on the U.S. Mercantile Exchange. The rise came amid reports that OPEC producers were planning to reduce production to stem a recent downward spiral of prices. That’s 35 percent higher per barrel than a year ago.
Many economists believe the recent surges in oil prices this year do not reflect a long term trend. But current global tensions, including the war in Iraq and the threat of terrorism in Saudi Arabia could affect supplies. Some analysts have estimate this “fear factor” may be adding $10 to $15 on the cost of a barrel of oil.
While the EIA long-term forecast shows prices lower than today’s, it also reflects the view held by many energy experts that a new era of long-term higher oil prices has begun.
Two years ago when oil cost about $27 a barrel, the EIA’s long-term forecast predicted a barrel of crude would cost about the same in 2025, not counting general inflation. Last year when crude was costing about $32 a barrel, the agency again estimated prices would be about $27 a barrel by 2025.
In other areas, the EIA forecast:
• Higher natural gas prices over the next six years, followed by declining prices after that as more gas becomes available, especially from imports of liquefied natural gas, or LNG, which will increased significantly.
• Continued use of coal as the primary fuel source for generating electric power. Coal will produce half of the country’s electricity in 2025, about the same as today.
• Carbon dioxide emissions, linked to climate change, will increase at an annual rate of 1.5 percent a year, although the rate of growth will decline.
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