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Short-Term Energy and Winter Fuels Outlook

Release Date: October 6, 2015  |  Next Release Date: November 10, 2015  |  Full Report    |   Text Only   |   All Tables   |   All Figures

U.S. Petroleum and Other Liquids

The most recent data from the U.S. Federal Highway Administration show Americans drove a record 1.82 trillion miles during the first seven months of 2015, compared with the previous high of 1.77 trillion miles driven in the first seven months of 2007, contributing to higher gasoline consumption in the United States.

Monthly data show gasoline consumption in the United States increased by 3% during the first seven months of 2015 compared with same period during 2014. U.S. gasoline consumption growth reflects strong growth in employment and lower gasoline prices. Growing domestic consumption and strong gasoline consumption growth globally contributed to high refinery wholesale gasoline margins (the difference between the wholesale price of gasoline and the price of Brent crude oil) for most of 2015. Margins returned to more typical seasonal levels in September. U.S. average wholesale gasoline margins averaged 40 cents/gal in September, down 24 cents/gal from the level in August and close to the September 2014 level.

Regular gasoline retail prices fell across all regions in September, after refinery outages in the Midwest eased and imports of gasoline into the West Coast increased supplies in that region. U.S. average regular gasoline retail prices fell from $2.64/gal in August to $2.37/gal in September. Monthly average regional gasoline retail prices ranged from a low of $2.07/gal in PADD 3 (Gulf Coast) to a high of $2.96/gal in PADD 5 (West Coast). EIA expects gasoline prices to fall from current levels, with the U.S. regular gasoline price averaging $2.03/gal in December 2015.

Liquid Fuels Consumption

Total U.S. liquid fuels consumption is projected to increase by 340,000 b/d (1.8%) in 2015, up from an increase of 140,000 b/d (0.8%) last year. U.S. consumption has been stimulated by continuing employment and economic growth and lower petroleum product prices.

Consumption growth in 2015 is led by motor gasoline, which increases by 190,000 b/d (2.1%) following growth of 80,000 b/d (0.9%) in 2014. Forecast gasoline consumption averages 9.1 million b/d in 2015, the highest level since the peak of 9.3 million b/d in 2007. Although total nonfarm employment and total highway travel have increased by 2.9% and 3.4%, respectively, over the past eight years, improving vehicle fuel economy has steadily contributed to lower gasoline consumption. Gasoline consumption is forecast to remain flat in 2016, as a long-term trend toward vehicles that are more fuel efficient offsets the effect of continued economic growth on highway travel.

Jet fuel consumption, which grew by 40,000 b/d in 2014, is forecast to rise by 60,000 b/d (3.8%) in 2015. Forecast jet fuel consumption is roughly flat in 2016, with improvement in average airline fleet fuel economy offsetting continuing growth in freight and passenger travel.

Consumption of distillate fuel, which includes diesel fuel and heating oil, is forecast to fall by 30,000 b/d (0.7%) in 2015 and then increase by 50,000 b/d (1.3%) in 2016. The 2016 growth is driven by increasing manufacturing output, foreign trade, and marine fuel use.

Hydrocarbon gas liquids (HGL) consumption, which fell by 50,000 b/d (1.9%) in 2014, is projected to increase by 70,000 b/d in 2015 and by 80,000 b/d in 2016, as new petrochemical plant capacity increases the use of HGL as a feedstock. New HGL export terminal capacity contributes to an increase in HGL net exports from an average of 560,000 b/d in 2014 to 1.2 million b/d in 2016.

Liquid Fuels Supply

U.S. crude oil production is projected to increase from an average of 8.7 million b/d in 2014 to 9.2 million b/d in 2015 and then decrease to 8.9 million b/d in 2016. The crude oil production forecast continues to reflect an oil price outlook that will weigh on oil-directed rig counts and drilling and well completion activities throughout the forecast period.

Based on the latest survey-based reporting of monthly crude oil production estimates, U.S. production averaged 9.4 million b/d in the first half of 2015. This level is 0.2 million b/d higher than the average production during the fourth quarter of 2014, despite a more than 60% decline in the total U.S. oil-directed rig count since October 2014. However, crude oil production started to decrease in the second quarter of 2015, beginning with Lower 48 onshore production in April. Although the Lower 48 onshore decline was offset by production gains in the Gulf of Mexico that kept total production growth positive in April, total U.S. production began declining in May.

EIA expects U.S. crude oil production declines generally to continue through August 2016, when total production is forecast to average 8.7 million b/d. Forecast production begins rising in late 2016, returning to an average of 9.0 million b/d in the fourth quarter. A total of 12 projects are scheduled to come online in the Gulf of Mexico in 2015 and 2016, pushing up production from an average of 1.4 million b/d in the fourth quarter of 2014 to more than 1.6 million b/d in the fourth quarter of 2016.

Expected crude oil production declines from May 2015 through mid-2016 are largely attributable to unattractive economic returns in some areas of both emerging and mature onshore oil production regions, as well as seasonal factors such as anticipated hurricane-related production disruptions in the Gulf of Mexico. Reductions in 2015 cash flows and capital expenditures have prompted companies to defer or redirect investment away from marginal exploration and research drilling to focus on core areas of major tight oil plays. Reduced investment has resulted in the lowest count of oil-directed rigs in about five years and in well completions that are significantly behind 2014 levels.

Oil prices, particularly in the second quarter of 2015, remained high enough to support continued development drilling in the core areas within the Bakken, Eagle Ford, Niobrara, and Permian formations, with July and August showing the first consecutive month-to-month increases in the oil-directed rig count since September and October 2014. However, WTI prices below $60/b through the forecast period are anticipated to limit onshore drilling activity and well completion totals, despite continued increases in rig and well productivity and falling drilling and completion costs. The forecast remains sensitive to actual wellhead prices and rapidly changing drilling economics that vary across regions and operators.

While projected oil production in the Gulf of Mexico rises during the forecast period, oil production in Alaska falls. Production in these areas is less sensitive to short-term price movements than onshore production in the Lower 48 states and reflects anticipated growth from new projects in the Gulf of Mexico and declines from legacy fields in Alaska.

HGL production at natural gas processing plants reached a record high of 3.31 million b/d in April 2015, and it is projected to average 3.27 million b/d in 2015 and 3.61 million b/d in 2016. EIA expects higher ethane recovery rates in 2016 following planned increases in petrochemical plant feedstock demand in the United States and abroad. Waterborne ethane exports are expected to begin by the end of 2015 as new terminals and expansions allow for higher quantities of domestically produced ethane, propane, and butanes to reach the international market.

U.S. petroleum product gross exports continue to grow, up almost 0.5 million b/d (12%) through July 2015 compared with the same period in 2014. More than half of the growth in liquid fuel exports came from HGL. The increase in refined product exports, combined with the growth in domestic liquid fuels consumption, contributed to U.S. refinery utilization averaging 91.2% during the first seven months of the year, up from 89.4% last year, and the highest rate for this period since 2005. Gross inputs to U.S. refineries exceeded 17 million b/d for six consecutive weeks in July and August, a level not previously reached or exceeded in any week since EIA began publishing the data in 1990.

Petroleum Product Prices

Rising crude oil prices, strong gasoline demand, and ongoing refinery outages on the West Coast contributed to an increase in U.S. regular gasoline retail prices from a monthly average of $2.47/gal in April to $2.80/gal in June. Falling crude oil prices and narrowing wholesale gasoline margins have since contributed to prices declining to an average of $2.37/gal in September. EIA expects monthly average gasoline prices to decline in the coming months as refineries continue to produce high levels of gasoline, as demand begins to decrease following the summer driving season, and as the market transitions to lower-cost, winter-grade gasoline. EIA projects regular gasoline retail prices to average $2.12/gal in the fourth quarter of 2015.

The U.S. regular gasoline retail price, which averaged $3.36/gal in 2014, is projected to average $2.42/gal in 2015 and $2.38/gal in 2016. The 2015 average price is 1 cent/gal higher than in the September STEO, and the 2016 average price is unchanged.

The diesel fuel retail price, which averaged $3.83/gal in 2014, is projected to fall to an average of $2.72/gal in 2015 and then rise to $2.77/gal in 2016.

U.S. Petroleum and Other Liquids
  2013 2014 2015 2016
Crude Oil prices (dollars per barrel)
WTI Spot Average 97.98 93.17 49.53 53.57
Brent Spot Average 108.56 98.89 53.96 58.57
Imported Average 98.12 89.63 47.19 50.12
Refiner Average Acquisition Cost 100.46 92.05 49.16 52.59
Retail prices including taxes (dollars per gallon)
Regular Gasoline 3.51 3.36 2.42 2.38
Diesel Fuel 3.92 3.83 2.72 2.77
Heating Oil 3.78 3.72 2.73 2.65
Production (million barrels per day)
Crude Oil 7.45 8.71 9.25 8.86
Natural Gas Plant Liquids 2.61 3.01 3.27 3.61
Fuel Ethanol 0.87 0.93 0.95 0.95
Biodiesel 0.089 0.083 0.092 0.098
Consumption (million barrels per day)
Motor Gasoline 8.84 8.92 9.11 9.12
Distillate Fuel Oil 3.83 4.04 4.01 4.06
Jet Fuel 1.43 1.47 1.53 1.52
Total Consumption 18.96 19.11 19.44 19.59
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 1.5 2.4 2.5 2.5
Heating Degree Days 18.5 1.9 -4.5 -3.8
Distillate-weighted Industrial Production 3.2 2.5 1.0 2.3

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