–Gasoline, Diesel Real Prices To Avg $3.69, $3.89 In 2035}
–World Oil Consumption 110.8m b/d In 2035 Vs. 83.7m b/d In 2009

By Brai Odion-Esene

WASHINGTON (MNI) – After a sharp fall in the second half of 2008
due to the global recession, oil prices will rise gradually as the
global economy recovers and global demand grows “more rapidly” that
liquids supplies from non-OPEC oil producers, the U.S. Energy
Information Administration predicted Thursday.

In its Annual Energy Outlook Reference case, the EIA presented
updated projections for U.S. energy markets through 2035. By then, the
EIA estimates the average real price of crude oil will be $125 per
barrel “in 2009 dollars,” or about $200/barrel in nominal dollars.

In the report’s reference case, real prices (in 2009 dollars) for
gasoline and diesel increase from $2.35 and $2.44 per gallon,
respectively, in 2009 to $3.69 and $3.89 per gallon in 2035.

“The AEO2011 Reference case assumes that limitations on access to
energy resources restrain the growth of non-OPEC conventional liquids
production between 2009 and 2035, and that OPEC targets a relatively
constant market share of total world liquids production,” the EIA said.

The agency added that the degree to which non-OPEC countries and
countries outside the OECD restrict access to potentially productive
resources contributes to world oil price uncertainty. Other factors
causing uncertainty include OPEC investment decisions, which will affect
future world oil prices and the economic viability of unconventional
liquids.

The EIA projects world liquids consumption to grow from 83.7
million barrels per day in 2009 to 110.8 million barrels per day in
2035, with most of the growth, as expected, from non-OECD countries or
regions lead by China, India, and the Middle East.

On the supply side, the EIA noted that in several resource-rich
regions (such as Brazil, Russia, and Kazakhstan), high oil prices,
expanded infrastructure, and further investment in exploration and
drilling should contribute to additional non-OPEC oil production.

As for the U.S.’ neighbor to the north, it said with the economic
viability of Canada’s oil sands supported by rising world oil prices and
advances in production technology, Canadian oil sands production reaches
5.1 million barrels per day in 2035.

Within the U.S., crude oil production is projected to rise from 5.4
million barrels per day in 2009 to 6.1 million barrels per day in 2019,
before declining slightly from that level through 2035. The EIA sees
increases in production coming from onshore enhanced oil recovery
projects and shale oil plays.

Predicting the U.S. real GDP to grow by an average of 2.7% from
2009 to 2035, the EIA expects the rise in energy prices, among other
factors, to reduce the share taken up by imports in meeting the nation’s
total energy demand.

“Projected demand for energy imports is moderated by increased use
of domestically produced biofuels, demand reductions resulting from the
adoption of efficiency standards, and rising energy prices,” the EIA
said.

It also expects rising fuel prices to spur domestic energy
production across all fuels, also causing the growth in energy imports
to “moderate.” In the reference case, the net import share of total U.S.
energy consumption in 2035 is 18%, compared with 24% in 2009.

On the renewable energy front, the EIA warns that although
non-hydro renewables and natural gas are the fastest growing fuels used
in electricity generation, coal is still the dominant fuel because of
the large amount of existing capacity.

“Coal remains the dominant energy source for electricity generation
because of continued reliance on existing coal-fired plants,” it said.

Still, the share of renewable energy and natural gas in electricity
generation is expected to rise going forward. The generation share from
renewable resources increases from 11% in 2009 to 14% in 2035, the EIA
projected, due to Federal tax credits in the near-term and State
requirements in the long term.

Natural gas will play a growing role “due to lower natural gas
prices and relatively low capital construction costs that make it more
attractive than coal,” the EIA said. The share of generation from
natural gas increases from 23% in 2009 to 25% in 2035.

As a result of this and other factors — such as recovering
industrial natural gas demand — U.S. natural gas consumption rises 16%
from 22.7 trillion cubic feet in 2009 to 26.5 trillion cubic feet in
2035, the EIA said.

** Market News International Washington Bureau: 202-371-2121 **

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