Foreign Oil Will Drop & Alternative Fuels Expected to Increase

LCT Staff
Posted on December 23, 2008

WASHINGTON, D.C. – U.S. dependence on foreign oil will drop dramatically over the next two decades as Americans are expected to confront rebounding oil prices, use more biofuels like ethanol, and drive more fuel-efficient cars, the Energy Department predicted.

But the long-range energy forecast also said that coal, oil, and natural gas – all of which produce gases linked to climate change – will provide nearly 80% of the country's energy in 2030, barring mandatory limits on carbon dioxide emissions that most likely would cause that percentage to decline.

The analysis by the department's Energy Information Administration projects virtually no growth in U.S. petroleum use through the year 2030 because of wider use of ethanol and biodiesel and a push toward greater automobile fuel efficiency, including the growing popularity of gas-electric hybrid vehicles.

It is the first time in more than 20 years that petroleum demand in the United States is projected to be essentially flat for years to come, said Howard Gruenspecht, the energy administration's acting director. It "breaks this trend" of steady annual petroleum demand increases dating back to the 1980s, he said. The reversal began this year with U.S. petroleum use expected to decline by a million barrels a day, or about 5%, compared with 2007.

As a result, net U.S. petroleum imports are expected to decline sharply, the energy administration report predicted, with liquid fuel imports – primarily oil – accounting for only 40% of U.S. consumption by 2025, compared with 58% last year. That's still higher than what the United States imported in the early 1970s when foreign oil one year accounted for only 28% of domestic consumption.

The report says America's lessening of its oil appetite stems from an expected strong expansion of alternative fuels, with a 3.3% a year growth in the use of renewable fuels – not only for electricity generation but also as a motor fuel.

Ethanol and biodiesel will be used much more widely as motor fuels, and a new generation of cars will hit showrooms. Sixty percent of car sales by 2030 are likely to be vehicles that rely heavily or exclusively on fuels other than gasoline including conventional hybrids, plug-in hybrids that are powered by the electric grid, and flex-fuel vehicles that use 85% ethanol, said Gruenspecht.

The report said gas-electric hybrid cars, which automakers and consumers already have embraced, will account for 38% of the market by 2030, compared with 2% last year, the report suggests.

But oil prices also are expected to keep U.S. petroleum demand in check.

Although crude oil prices have fallen dramatically since their peak in July of $147 a barrel – tumbling below $40 per barrel for the first time since 2004 – the energy administration predicts global crude oil costs will rebound after current economic problems subside. By 2030, nominal oil prices are projected to be $189 a barrel, equal to $130 in 2007 dollars, said the report.

The agency's forecast assumes no changes in current laws or regulations, including any mandatory limits on carbon dioxide emissions in response to climate change.

Gruenspecht acknowledged that if Congress enacts limits on carbon emissions, some of the report's conclusions will change. But he said the report does not ignore the prospect of lawmakers putting a cost on carbon altogether because one cannot "assume this issue away."

Source: Associated Press

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