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Short-Term Energy Outlook

Release Date: November 12, 2014  |  Next Release Date: December 9, 2014  |  Full Report    |   Text Only   |   All Tables   |   All Figures

U.S. Petroleum and Other Liquids

U.S. weekly regular gasoline retail prices averaged $2.99/gal on November 3, which marked a decrease of 36 cents since the end of September and the first time gasoline prices have averaged below $3.00/gal since December 20, 2010. In addition to typical seasonal downturns in gasoline demand and the switchover to winter-grade gasoline, falling crude oil prices have been largely responsible for the drop in retail gasoline prices. EIA expects that low crude oil prices and weak demand will help gasoline prices decrease further in the coming months, falling to an average of $2.80/gal in December.

Liquid Fuels Consumption

Total U.S. liquid fuels consumption rose by 470,000 bbl/d (2.5%) in 2013, the largest increase since 2004. Consumption of hydrocarbon gas liquids (HGL) registered the largest gain, increasing by 190,000 bbl/d (8.5%). In 2014, total liquid fuels consumption is expected to fall by 60,000 bbl/d (0.3%), with declines in the consumption of HGL, residual fuel oil, and other oils offsetting increases in distillate fuel, jet fuel, and unfinished oils consumption. Total consumption grows by 160,000 bbl/d in 2015, with distillate consumption accounting for 100,000 bbl/d of the growth.

Motor gasoline consumption grew by 160,000 bbl/d (1.9%) in 2013, the largest increase since 2004. EIA expects gasoline consumption to remain mostly unchanged in 2014 and then decline by 20,000 bbl/d in 2015, as improving fuel economy in new vehicles continues to offset highway travel growth. Distillate fuel consumption increases by 110,000 bbl/d (3.0%) in 2014, reflecting colder-than-average first-quarter weather and economic growth. Consumption of that fuel rises by a further 100,000 bbl/d (2.5%) in 2015. Some of the growth in distillate fuel consumption in 2015 comes from Annex VI to the International Convention for the Prevention of Pollution from Ships (MARPOL Annex VI), which is an international agreement that generally requires the use of fuels below 1,000 parts per million sulfur by marine vessels in most U.S. waters, unless alternative devices, procedures, or compliance methods are used to achieve equivalent emissions reductions. However, EIA also expects low-sulfur distillate fuels will continue to be blended into residual fuel to meet the new sulfur limit and reported as residual fuel production and consumption.

Liquid Fuels Supply

Forecast U.S. crude oil production increases from an average of 7.5 million bbl/d in 2013 to 8.6 million bbl/d in 2014 and 9.4 million bbl/d in 2015. Because of the recent decline in crude oil prices, EIA has revised U.S. crude oil production in 2015 downward by an average of 80,000 bbl/d compared with last month's forecast. As the WTI crude oil price is forecast to average $78/bbl in 2015, EIA expects to see some reduction in drilling activity because of marginal economic returns in some areas. This will primarily occur in noncore areas of emerging and mature tight oil basins, where low-producing wells become less attractive at lower prices and companies scale back expensive exploration and research drilling. The production forecast is not affected significantly because the wells that will not be drilled at these prices produce relatively little compared to wells in the core areas of a formation. Oil prices remain high enough to support most drilling activity in the Bakken, Eagle Ford, Niobrara, and Permian Basin, which contribute the majority of U.S. oil production growth.

HGL production at natural gas liquids plants is projected to increase from 2.6 million bbl/d in 2013 to 3.2 million bbl/d in 2015. Ethane and propane are expected to contribute most to the projected growth, with the majority of production directed towards domestic petrochemical use or exports. EIA expects higher rates of ethane recoveries as a result of planned increases in petrochemical facility feedstock demand, while export terminal expansions will allow higher quantities of domestically produced propane and butanes to reach the international market.

The growth in domestic production has contributed to a significant decline in petroleum imports. The share of total U.S. liquid fuels consumption met by net imports fell from 60% in 2005 to an average of 33% in 2013. EIA expects the net import share to decline to 21% in 2015, which would be the lowest level since 1969.

Petroleum Product Prices

Monthly U.S. average regular gasoline retail prices fell from $3.69/gal in June to $3.17/gal in October. EIA expects that U.S. regular gasoline retail prices will continue to fall to an average of $2.80/gal in December 2014. The U.S. annual average regular gasoline retail price, which averaged $3.51/gal in 2013, is projected to average $3.39/gal in 2014 and $2.94/gal in 2015, $0.06/gal and $0.44/gal lower than in last month's STEO, respectively. Diesel fuel prices, which averaged $3.92/gal in 2013, are projected to fall to an average of $3.82/gal in 2014 and $3.38/gal in 2015, $0.04 and $0.41 lower than in last month's STEO, respectively.

The February 2015 New York Harbor reformulated blendstock for oxygenate blending (RBOB) futures contract averaged $2.12/gal for the five trading days ending November 6, 2014. Based on the market value of futures and options contracts for this key petroleum component of gasoline, there is a 15% probability that the RBOB futures contract price at expiration will fall below $1.85/gal, consistent with a monthly average regular-grade gasoline retail price less than $2.50/gal in February 2015. There is also a 19% probability that the RBOB futures contract price at expiration may exceed $2.35/gal, consistent with a retail price of $3.00/gal or higher. Daily and weekly national average prices can differ significantly from monthly and seasonal averages, and there are also significant differences across regions, with monthly average prices in some areas falling above or below the national average price by $0.30/gal or more.

Lower projected crude oil prices also contribute to a reduction in the forecast residential heating oil price and average household heating oil expenditures this winter. The average household that uses heating oil as its primary space heating fuel is expected to pay an average of $3.27/gal this winter, $0.36/gal lower than projected in last month's STEO. The average household is now expected to spend $1,779 for heating oil this winter, $213 lower than in last month's STEO.

U.S. Petroleum and Other Liquids
  2012 2013 2014 2015
Crude Oil prices (dollars per barrel)
WTI Spot Average 94.12 97.91 95.00 77.75
Brent Spot Average 111.65 108.64 101.04 83.42
Imported Average 101.09 98.12 91.12 74.24
Refiner Average Acquisition Cost 100.82 100.46 93.57 76.76
Retail prices including taxes (dollars per gallon)
Regular Gasoline 3.63 3.51 3.39 2.94
Diesel Fuel 3.97 3.92 3.82 3.38
Heating Oil 3.79 3.78 3.72 3.25
Production (million barrels per day)
Crude Oil 6.50 7.46 8.57 9.42
Natural Gas Plant Liquids 2.41 2.61 2.95 3.19
Fuel Ethanol 0.86 0.87 0.93 0.93
Biodiesel 0.064 0.089 0.080 0.084
Consumption (million barrels per day)
Motor Gasoline 8.68 8.84 8.85 8.83
Distillate Fuel Oil 3.74 3.83 3.94 4.04
Jet Fuel 1.40 1.43 1.45 1.45
Total Consumption 18.49 18.96 18.91 19.07
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 2.3 2.2 2.3 2.7
Heating Degree Days -12.6 18.6 1.0 -6.6
Distillate-weighted Industrial Production 2.9 2.9 3.4 4.0

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