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Short-Term Energy Outlook

Release Date: November 10, 2015  |  Next Release Date: December 8, 2015  |  Full Report    |   Text Only   |   All Tables   |   All Figures

U.S. Petroleum and Other Liquids

Monthly data show gasoline consumption in the United States increased by 2.7% during the first eight months of 2015 compared with same period in 2014. U.S. gasoline consumption growth reflects strong increases 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. Average wholesale gasoline margins reached a high of 73 cents/gal in August, which was the highest monthly average since May 2007. Margins returned closer to typical seasonal levels in October. Wholesale gasoline margins averaged 31 cents/gal in October, down 13 cents/gal from the level in September and 5 cents/gal above the October 2014 level.

In October, regular gasoline retail prices fell across all regions except in PADD 2 (Midwest), where high levels of planned and unplanned refinery outages reduced gasoline supplies. U.S. average regular gasoline retail prices fell from $2.37/gal in September to $2.29/gal in October. Monthly average regional gasoline retail prices ranged from a low of $2.01/gal in PADD 3 (Gulf Coast) to a high of $2.73/gal in PADD 5 (West Coast). EIA expects gasoline prices to fall from current levels, with the U.S. regular gasoline price averaging $2.06/gal in December 2015.

Liquid Fuels Consumption

Total U.S. liquid fuels consumption is projected to increase by 330,000 b/d (1.7%) 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. Total liquid fuels consumption growth in 2016 is forecast to be 120,000 b/d (0.6%).

Consumption growth in 2015 is led by motor gasoline, which is forecast to increase by 190,000 b/d (2.1%) to an average of 9.1 million b/d in 2015, the highest level since the record of 9.3 million b/d in 2007. Although total nonfarm employment and total highway travel have increased by 2.9% and 3.5%, respectively, over the past eight years, improving vehicle fuel economy continues to keep gasoline consumption below its previous peak. Gasoline consumption growth is forecast to slow to 20,000 b/d (0.2%) in 2016, as a long-term trend toward vehicles that are more fuel-efficient continues to offset the effects of economic and population 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 (3.9%) in 2015. Forecast jet fuel consumption is roughly flat in 2016, with improvement in average airline fleet fuel economy offsetting 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 increase by 60,000 b/d (1.4%) in 2016. The 2016 growth is driven by increases in 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 40,000 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 9.3 million b/d in 2015 and then decrease to 8.8 million b/d in 2016. Forecast crude oil production in 2016 is 0.1 million b/d lower than in last month's STEO. Lower forecast production reflects lower crude oil prices and rig counts in 2016 than projected in last month's STEO.

According to the latest survey-based reporting of monthly crude oil production estimates, U.S. production averaged 9.4 million b/d through the first eight months of 2015. This level is 0.1 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, monthly crude oil production started to decrease in the second quarter of 2015, led by Lower 48 onshore production. From March 2015 through October 2015, Lower 48 onshore output has fallen from more than 7.6 million b/d to about 7.1 million b/d.

EIA estimates total crude oil production has declined almost 0.5 million b/d since April, averaging 9.1 million b/d in October. EIA expects U.S. crude oil production declines to continue through September 2016, when total production is forecast to average 8.5 million b/d. This level of production would be almost 1.1 million b/d less than the 2015 peak reached in April. Forecast production begins increasing in late 2016, returning to an average of 8.8 million b/d in the fourth quarter.

Expected crude oil production declines through September 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 developmental 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, with WTI prices below $50/b since August, oil-directed rig counts have resumed declining. Projected oil prices below $60/b throughout the forecast period are expected 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. Twelve 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 1.6 million b/d in the fourth quarter of 2016. It is possible some projects might begin later than expected, shifting some of the anticipated production gains from late 2016 into early 2017.

HGL production at natural gas processing plants reached 3.32 million b/d in August 2015, and it is projected to average 3.28 million b/d in 2015 and 3.56 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. New terminals and expansions and a growing ship fleet are expected to allow higher quantities of domestically produced ethane, propane, and butanes to reach international markets. Forecast net HGL exports average 1.2 million b/d in 2016.

Petroleum Product Prices

Narrowing wholesale gasoline margins contributed to U.S. regular gasoline retail prices declining to an average of $2.29/gal in October, down from an average of $2.60/gal in the third quarter. EIA expects monthly average gasoline prices to continue declining in the coming months as refineries continue to produce high levels of gasoline and as the market transitions to lower-cost, winter-grade gasoline. EIA projects regular gasoline retail prices to average $2.18/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 $2.43/gal in 2015 and $2.33/gal in 2016. The 2016 forecast price is 5 cents/gal lower than in the October STEO. The diesel fuel retail price, which averaged $3.83/gal in 2014, is projected to average $2.72/gal in 2015 and $2.70/gal in 2016.

Lower projected crude oil prices this winter compared with last winter 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 $2.50/gal this winter, 54 cents/gal lower than last winter. The average household is now expected to spend $1,360 for heating oil this winter, $493 less than last winter. The reduction in expenditures also reflects lower forecast consumption because of warmer forecast temperatures this winter compared with last winter.

Propane prices this winter are expected to be 4% lower in the Northeast and 12% lower in the Midwest, contributing to households spending 14% and 20% less on propane in those regions, respectively.

U.S. Petroleum and Other Liquids
  2013 2014 2015 2016
Crude Oil prices (dollars per barrel)
WTI Spot Average 97.98 93.17 49.88 51.31
Brent Spot Average 108.56 98.89 53.82 56.24
Imported Average 98.12 89.63 47.75 47.87
Refiner Average Acquisition Cost 100.46 92.05 49.70 50.33
Retail prices including taxes (dollars per gallon)
Regular Gasoline 3.51 3.36 2.43 2.33
Diesel Fuel 3.92 3.83 2.72 2.70
Heating Oil 3.78 3.72 2.70 2.57
Production (million barrels per day)
Crude Oil 7.45 8.71 9.29 8.77
Natural Gas Plant Liquids 2.61 3.01 3.28 3.56
Fuel Ethanol 0.87 0.93 0.96 0.95
Biodiesel 0.089 0.083 0.091 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 4.07
Jet Fuel 1.43 1.47 1.53 1.52
Total Consumption 18.96 19.11 19.44 19.56
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 1.5 2.4 2.5 2.7
Heating Degree Days 18.5 1.9 -5.4 -3.3
Distillate-weighted Industrial Production 3.2 2.5 1.0 2.3

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