The U.S. Department of Energy’s updated long-term forecast predicts crude oil prices more than $20 per barrel higher and gasoline prices more than 50 cents per gallon higher than its previous forecast a year ago. Lower diesel prices are expected the next six years, however.
The preliminary Annual Energy Outlook 2006, published Monday, Dec. 12 by the Energy Information Administration, predicts that crude oil prices will fall from current levels to about $47 per barrel (in 2004 dollars) in 2014, then rise to $54 per barrel in 2025 and $57 per barrel in 2030. The reason: Demand is outpacing supply.
“There is now demand in China, Asia and India, and the demand there is growing,” says Denton Cinquegrana, markets editor for the Oil Price Information Service. “This should keep oil prices relatively high, but like any other market there are boom-and-bust cycles, and right now we are in the middle of a tremendous boom cycle.”
Chris Lee of ProMiles suggested a grain of salt may be in order. “I am skeptical at best on long-range forecasts because they can be affected by so many unknown factors,” he says.
The DOE estimate may indeed be exaggerated, Cinquegrana says. Oil prices could drop if more supplies are found or new technologies are invented that make it easier to pull hard-to-reach oil out of the ground. Price increases, too, will make some hard-to-reach oil more profitable and more likely to be extracted. “In the long run, all of these things will pull the price of oil down,” Cinquegrana says.
The Annual Energy Outlook 2006 also predicts greater crude oil production and an increased demand for ethanol and biodiesel.
The projected prices for a gallon of on-highway diesel fuel (in 2004 dollars), including state and federal taxes but not local and county taxes, are as follows:
The full Annual Energy Outlook 2006 will be released early in the new year, along with regional projections and a report on the major assumptions underlying the projections.