WASHINGTON D.C. --- The Energy Department this week adjusted its long-term forecasts for crude oil prices, in light of expected trends affecting future energy supply and demand. World crude oil prices, expressed in terms of the average price of imported light, low-sulfur crude oil to U.S. refiners, are projected to increase from $40.49 per barrel (2004 dollars) in 2004 to $46.90 per barrel (2004 dollars) in 2014, and then rise to $54.08 per barrel in 2025 and $56.97 per barrel in 2030. These projections, part of a reference case, are featured in the Energy Information Administration’s (EIA) preliminary release of its “Annual Energy Outlook 2006” (AEO2006). This annual report presents a midterm forecast and analysis of U.S. energy supply, demand and prices through 2030. The projections are based on results from the EIA’s National Energy Modeling System. The report’s early release includes the reference case, but the full publication will include complete documentation and additional cases examining energy markets. The full report is scheduled for release in early 2006. The EIA said it now believes that the reference-case oil price path in recent editions of the Annual Energy Outlook did not fully reflect the causes of market volatility and their implications for future oil prices. In the AEO2006 reference case, world oil supplies are assumed to be tighter because OPEC’s productive capacity falls short of previous projections. The higher world oil prices in AEO2006 lead to greater domestic crude oil production and boost demand for alternative sources of transportation fuel, such as ethanol and biodiesel. Higher oil prices stimulate domestic coal-to-liquids production. In some of the scenarios with even higher oil prices, conditions also stimulate domestic gas-to-liquids and shale oil production. These higher prices also lower demand growth, particularly through their effect on fuel choice and vehicle efficiency decisions in the transportation sector. This is the case even without assuming that proposed fuel economy standards, under consideration today, will be implemented. Much of the increase in new light-duty vehicle fuel economy reflects greater penetration by hybrid and diesel vehicles, and slower growth in the sales of light trucks and sport utility vehicles. Sales of “full hybrid” vehicles in 2025 are 31 percent (340,000 vehicles) higher in the AEO2006 reference case, and diesel vehicle sales are 29 percent (290,000 vehicles) higher than projected in the AEO2005 reference case. In spite of the higher projected sales of hybrid (1.5 million) and diesel (1.3 million) vehicles in 2025, each is expected to account for only 7 percent of new vehicle sales in the AEO2006 reference case, even though the projected hybrid sales are higher than current industry expectations. As a result of both supply and demand changes, growth in petroleum imports is expected to be less than projected last year. Net petroleum imports, which met 58 percent of oil demand in 2004, are projected to meet 60 percent of demand in 2025. That’s considerably less than the projected 68 percent predicted for that same year in the AEO2005 reference case.