"We are not going to be rid of oil by 2020, but neither are we going to be dependent on it," Prime Minister Goran Persson told a news conference. "Oil is on the way to being phased out."

The Commission on Oil Independence, appointed by Persson in December last year set four main targets for the government.

It said that Sweden, which produces around 35 percent of its energy from oil, should cut the amount of petrol and diesel in the transport sector by 40-50 percent.

This can be done through producing more alternative fuels, such as ethanol, from crops and wood products and by developing cars that use less petrol. For example, Sweden could plant between 300,000 and 500,000 hectares of energy crops, it said.

"The transport sector is the toughest to change," Persson said, adding it was also where the most can be achieved.

The panel also set a target of ending oil use for domestic heating and a 25-40 percent reduction in industry through efficiency programmes and replacement by bio-fuels.

Across the whole society, energy efficiency should be raised by 20 percent at least by 2020, the report said.

Analysts have pointed out that Sweden faces an uphill task in moving away from oil as it is also committed to phasing out nuclear power, which provides around 45 percent of the electricity produced in the Nordic country.

"A Sweden that is independent of oil ... needs good access to electricity at a competitive price," said Bo Kallstrand, chief executive of Swedenergy, an industry group representing electricity producers.