Federal energy analysts said Wednesday that U.S. demand for oil barely will grow over the coming decades because of efforts to reduce use and invest in renewable power sources, but fossil fuels will continue to make up 80 percent of the nation's energy supplies.

The Energy Information Administration also revised its estimates of carbon pollution downward from a year ago, saying three factors are responsible: higher prices, more energy-efficient technology and business investors wary of spending money on “dirty” fuel development.

“There's no question that the issue of climate change, even in the absence of policy change, is affecting investment behavior,” said Howard Gruenspecht, acting administrator at the EIA. "Concern about new greenhouse gas regulations has dampened interest in new coal plants."

Concurrently, analysts expect the nation's carbon dioxide output to remain relatively flat over the next few decades because of the new attitudes of investors and consumers.

The predictions appear to foreshadow much of the wider change in energy policy and increased environmental regulations expected from the incoming Obama administration and the emboldened Democrat-led Congress.

The EIA also expects that reliance on oil will drop significantly between now and 2030: The United States imported 58 percent of oil consumed in 2007 and is expected to import 41 percent in 2030.

“This is a substantial move toward reduced dependency on imports,” Mr. Gruenspecht said.

Fossil-fuel supporters used the findings to bolster their call for domestic oil and gas exploration.

“The oil price is a huge driver in this forecast,” said Mary Hutzler, an analyst with the Institute for Energy Research, an oil industry-funded think tank in the District.

Congress' decision to end the ban on offshore drilling drove up the expected supply of domestic oil, she said, and opening the Alaskan National Wildlife Refuge for exploration would further decrease the need for foreign oil.

"Conservation and renewables are going to be the primary areas to pursue," said Ms. Hutzler, who ran the EIA from 2001 to 2003. "The forecast shows that happening to a certain extent, and it may happen even more depending on what policies happen in the energy. I think an important issue is that fossil fuels still represent 79 percent of supply" in 2030.

Environmental groups Thursday said the EIA is likely understating some of its predictions, given that Congress and the incoming Obama administration widely expect to cap carbon emissions and invest heavily in renewable energy sources - both of which bode poorly for the fossil fuel industry.

"It would certainly be a colossal error to invest in something like a coal plant at this point," said Josh Dorner, spokesman for the Sierra Club. As market forces and the stick (the threat of increased federal regulations) appear to mitigate oil consumption, so, too, does the carrot (tax incentives) appear to increase alternative energy investments, analysts said.

A federal tax credit for solar panel projects previously had been capped at $2,000 per installation but was lifted earlier this year to allow a 30 percent write-off for the cost of a project - which can routinely cost up to $35,000, Mr. Gruenspecht said. The result, EIA estimates, will be a relatively large increase in solar energy use by 2030.

(Washington Times, 18/12/2008)