EIA: U.S. Oil Use Flat to 2035 Without New Policies

WASHINGTON (Dow Jones), Dec. 14, 2009

U.S. petroleum demand is expected to remain flat through to 2035 if the government doesn't enact any new policies that mandate lower greenhouse gas levels or higher efficiencies, the head of the Energy Information Administration said Monday.

The forecast comes as world leaders attempt to negotiate a global agreement to cut greenhouse gas emissions in Copenhagen and highlights the energy use implications if Congress or the administration doesn't act to cut gases such as carbon dioxide. Oil use is one of the largest human contributors to such emissions.

Overall carbon dioxide emissions are seen growing 8.7% from 2008 to 2035, compared to the 17% drop from 2005 levels by 2020 that the Obama administration is seeking from Congress.

In a long-term energy outlook, the EIA said biofuel production will provide the growth of total liquid fuel demand, but consumption of petroleum-based liquids is essentially flat to 2035. Total liquid fuel use will rise to 22 million barrels a day during that period from 19 million barrels a day now, the government predicts.

Under a renewable fuels mandate, ethanol production is forecast to grow to around 28 billion gallons in 2035 from around 10 billion gallons now. That's below the 36 billion gallons a year mandate for all biofuels by 2022, largely because of the expected slow growth of next-generation advanced biofuel technologies.

Total energy use is seen growing 14% from 2008 levels by 2035, including after a 5% decline from the recession.

EIA chief Richard Newell said U.S. oil demand has likely peaked prior to the recession, as biofuels cover any rise in liquid fuel demand.

Although fossil fuels are seen providing 78% of the nation's energy needs--down from 84% now--efficiency gains will help cut greenhouse gas emissions per capita at around 40% by 2035.

Forecasting a small growth of domestic oil production over the long term, with oil shale output rising in the later years as it becomes financially viable, the EIA said U.S. reliance on imported oil will slightly decline.

Greater fuel efficiency and increased domestic output are expected to cut imported fuel use, which accounted for as much as 60% of demand in recent years, to 40%-45% by 2035. With hybrid vehicle sales dominating the light duty vehicle market, the efficiency rate rises to 40 miles per gallon by 2035 from near 25 mph in 2000.

New technology and enhanced recovery techniques will help U.S. crude oil output rise to about 6 million barrels a day by 2027 from near 5 million barrels a day now and remain above 6 million barrels through the forecast period.

With the Organization of Petroleum Exporting Countries maintaining a predicted 40% share of the market, oil prices are expected to rise to around $133 a barrel in 2008 dollars by 2035, with world-wide demand growth pressuring prices up.

Natural gas production is seen growing to 23.3 trillion cubic feet in 2035 from 20.6 trillion in 2008, with the share of shale gas growing to provide nearly a quarter of all output. Increases in natural gas production from shale formations and from Alaska will offset declines elsewhere and help slash imports from 13% in recent years to just 2%-6% at the end of the forecast period, the EIA said. Prices will climb from the recession-hobbled levels of below $4 per thousand cubic feet in recent months to $8 per thousand cubic feet in 2035.

Stimulus funding, state mandates and tax credits will likely see non-hydro renewable represent 41% of electricity growth, led by biomass and solar, and 17% of total electricity generation, with natural gas generation accounting for most of the other power generation capacity. Greater efficiency will slow growth in electricity use to 1% throughout the forecast period from 2.4% growth in the 1990s, the EIA projected. Coal's share of electricity output drops to 43.8% in 2035 from 48.5% now.

Though the EIA expects 8 gigawatts of new nuclear power, costs seen rising 10%-20% for nuclear and coal power plant construction are expected to curb such capacity growth.

Copyright (c) 2009 Dow Jones & Company, Inc.


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