By Adam Wilmoth
KRT Business News

As Dick Clark was preparing to ring in 2004, energy experts predicted the country's demand for petroleum products would cool because of soaring prices.

The projections were half right.

Oil and gasoline prices surged well beyond record highs and the price of natural gas remained near seasonal highs throughout much of the year. America's hunger for energy, however, was not quenched by the higher prices as demand grew by more than 3 percent, according to government data.

Now at the start of 2005, projections call for demand to grow at least by another 3 percent on the year as the country's economy continues to pick up steam and as consumers continue to stay on the road, even as prices are likely to hold strong or climb higher.

In spite of the rising fuel prices, AAA and other groups have shown that people are driving more than ever. The recent Christmas travel season was expected to see record driving, although a wave of strong snow and ice storms appears to have dampened the enthusiasm.

Oil and natural gas producers have said the increasing demand for gasoline despite soaring prices shows that even at current rates, consumers are less affected by energy costs than they were 20 years ago.

"When you adjust for inflation, the price has not even begun to approach what people paid for gasoline in the early 1980s," said Bruce Bell, chairman of the Mid Continent Oil and Gas Association of Oklahoma. "It seems to me what we've established is that energy has been a real bargain."

Natural gas usage also is projected to climb in 2005.

Oil and natural gas prices historically have been driven largely by American usage, but the world energy market increasingly is being influenced by rapidly growing Asian economies, which are beginning to compete for world energy sources, Bell said.

The economy in China grew more than 30 percent in 2004, leading the country to become the world's second-largest oil importer. The increased petroleum usage in developing countries has been blamed for creating at least part of the tension between world supply and demand that has driven oil prices up the past two years.

Because of the rapidly increasing demand for world energy, Bell said, the United States and other countries must examine all options for increasing world energy production.

"We're going to have to continue to develop all the alternatives we can, and we have to look at unconventional petroleum reserves, such as the heavy tar sands in Canada," Bell said. "We're also going to have to take a sensible approach to allow companies in North America to drill for oil and natural gas where we know it is, including the West Coast, East Coast, Florida, Rocky Mountains and the North Slope of Alaska."

One of the leading alternative fuels today is wind power, which received a huge boost in the fall when Congress revived the production tax credit on renewable energy sources. The tax credit expired at the end of 2003, essentially halting all production nationwide.

With the extension, however, more than 2,000 megawatts of new wind generation is expected to come online nationwide this year. In Oklahoma, 106 megawatts of new wind generation are scheduled for 2005, and state utilities have said they are considering adding another 330 megawatts.

Oil and natural gas producers have downplayed wind energy's ability to displace natural gas-fired generators because wind is inconsistent and tends to blow strongest when electricity demand is at its lowest.

Kylah McNabb, however, said wind energy increasingly will begin to offset natural gas-powered plants as it grows in popularity.

"Wind is by no means going to take the place of natural gas or oil, but we believe wind power can help sustain the fossil fuel sources we have," said McNabb, coordinator of the Oklahoma Wind Power Initiative.

McNabb's comments were echoed by William Ambrose, president and founder of Cambridge, Mass.-based Emerging Energy Research. The research and advisory firm reported this week that wind power has become a commercially viable source of power for U.S. and Canadian utilities.

"We expect wind will still be only a marginal percentage of generation by 2010 representing less than 2 percent of total electric generation, but we think that will continue to gain momentum and grow to as much as 5 percent by 2020," Ambrose said.