Oil Prices to Continue Upward Trend in Years Ahead

U.S. oil prices are expected to rise to $108 per barrel by 2020 and $133 per barrel by 2035, according to the U.S. Department of Energy.

According to the Energy Information Administration's International Energy Outlook 2010, oil prices should continue their upward trend as demand increases and world economies continue to recover.

"Oil prices have been especially sensitive to demand expectations, with producers, consumers, and traders continually looking for an indication of possible recovery in world economic growth and a likely corresponding increase in oil demand," the outlook said.

According to the EIA, world oil prices increased sharply from 2003 to July 2008, while prices dropped sharply over the rest of 2008. Last year, oil prices started moving upward again.

The outlook also pointed out that petroleum and other liquid fuels will continue to be the largest energy source worldwide for the next 25 years, although projected higher oil prices erode their share of total energy use from 35 percent in 2007 to 30 percent in 2035.

By 2035, total liquid fuels consumption should rise 28 percent, or 24.5 million barrels per day, over 2007 levels, the EIA said. Conventional oil supplies from the Organization of the Petroleum Exporting Countries (OPEC) contribute 11.5 million barrels per day to the total increase in world liquid fuels production, and conventional supplies from non-OPEC countries add another 4.8 million barrels per day.

In addition, world natural gas consumption is projected to rise 1.3 percent per year, from 108 trillion cubic feet in 2007 to 156 trillion cubic feet in 2035.

"Renewables are the fastest-growing source of world energy supply, but fossil fuels are still set to meet more than three-fourths of total energy needs in 2035 assuming current policies are unchanged," said EIA Administrator Richard Newell.

For more information about the IEO2010, click here.