Government report says $50-plus oil here to stay

Monday, November 28th 2005, 10:55 am

By: News On 6

WASHINGTON (AP) _ Oil prices are projected to remain well above $50 a barrel for years to come, resulting in a greater shift to more fuel efficient cars and alternative energy sources, according to an analysis released Monday by the Energy Department.

The analysis reflected a sharp change from the department's projections a year ago when it predicted oil prices in constant dollars _ not counting normal inflation _ would decline to $31 a barrel by 2025.

The report, issued Monday by the department's Energy Information Administration, now projects oil will cost an average $54 a barrel in 2025 and $57 a barrel in 2030 before inflation. Currently, crude oil prices have been hovering around $60 a barrel, briefly soaring as high as $70 earlier this year.

The EIA report, however, projected that natural gas prices, which have soared to more than $14 per thousand cubic feet in recent weeks, would retreat and return to below $5 a thousand cubic feet in the years ahead. It projected a likely price of $4.46 per thousand cubic feet in 2016 as demand for the fuel eases and supplies increase.

But the agency said domestic gas production even as far out as 2025 is expected to be slightly less than projected a year ago, because of the long-term impact from Hurricanes Katrina and Rita. The hurricanes shut down Gulf of Mexico gas production and full operation is not expected until next summer. The impact of the hurricanes is ``expected to delay offshore drilling projects because of a lack of rigs and ... have a long-term effect on production levels,'' said the report.

The agency said it added about $21 to the future price of a barrel of crude because it does not expect OPEC oil producers to pump as much as oil as previously projected. Consequently, world oil supplies are presumed to remain tight over the next several decades.

Global oil demand, currently about 82 million barrels a day, is projected to grow to 111 million barrels a day by 2025, according to the EIA report. It said OPEC production is now likely to be about 11 million barrels a day less than what the EIA projected in its 2005 report.

With high oil prices a long-term fixture, there will be more domestic crude oil production, increased demand for unconventional transportation fuels such as ethanol and biodiesel and greater use of more fuel efficient hybrid gasoline-electric cars and trucks, the EIA said.

The EIA's long-term energy outlook report also:

_Scaled back the expected growth of liquefied natural gas imports into the United States. It said an increase of worldwide demand for LNG will reduce the amount coming into U.S. facilities.

_Projected a 9 percent growth in electricity production from nuclear power plants with a half-dozen new reactors likely to be built some time after 2014. Last year's report said no new reactors were on the horizon.

_Said that coal would remain the primary fuel for producing electricity through 2030.

_Predicted that despite higher oil costs and some increases in efficiency, U.S. energy demand would increase by 1.1 percent a year between now and 2030.

_Forecast that heat-trapping carbon dioxide releases into the atmosphere from burning fossil fuels will increase an average of 1.2 percent a year and reach 7,587 million metric tons by 2025, a 28 percent increase over the amount released in 2004.

Carbon dioxide is the leading so-called ``greenhouse'' gas that many scientists believe will cause a significant warming of the earth over the next century if atmospheric concentrations continue to increase.