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<br /> <br />. Long-Term Energy Contract Assessment. Contracts today are <br />generally written with automatic escalation provisions based on <br />an industry or commodity index or can be rolled over on a <br />short enough time frame so that a comparable effect is achieved. <br />The long-term result is that energy commodities should tend to <br />be close to the national market clearing price, allowing for <br />quality differentials in the case of crude petroleum and coal. A <br />summary of this assessment is presented in Appendix A. <br />. Energy Regulatory Analysis. Three Federal acts were determined <br />to impact future energy prices: the Energy Policy and Conser- <br />vation Act mandating the decontrol of domestic crude petroleum <br />prices; the Natural Gas Policy Act (NGPA) of 1978 mandating <br />the phased decontrol of wellhead natural gas prices for most <br />categories of production; and the Powerplant and Industrial <br />Fuel Use Act of 1978 requiring the switching from natural gas <br />to coal as a primary energy source for electric utilities and <br />industry. The regulations implementing these laws were explicitly <br />considered in developing the price projections; they are summa- <br />rized in the Energy Regulatory Analysis report. <br />. Historical Energy Prices Trend Analysis. A data base of histor- <br />ical energy commodity prices was developed and the long-term <br />annual real escalation rate was estimated for crude petroleum <br />and coal. Natural gas prices were not analyzed because of the <br />long history of price regulation which would be almost completely <br />phased out during the 1980's. <br />Coal prices (Lo.b. mine) were projected to continue to increase at <br />the long-term historical real annual escalation rate. Similarly, crude <br />petroleum price projections were made assuming that long-run price move- <br />ments of the world oil market over the next 40 years would be close to <br />that over the last 80 years. It was assumed that the rapid price escalations <br />of the 1970's represented a step-function increase. Domestic US crude <br />petroleum production was assumed to trade at the world market clearing <br />price by 1985, the first year of analysis in the study time frame. The <br /> <br />1-6 <br />