‹ Analysis & Projections

Short-Term Energy Outlook

Release Date: July 12, 2016  |  Next Release Date: August 9, 2016  |  Full Report    |   Text Only   |   All Tables   |   All Figures

U.S. Petroleum and Other Liquids

Growing domestic and global consumption of gasoline has contributed to high refinery wholesale gasoline margins (the difference between the wholesale price of gasoline and the price of Brent crude oil) for much of the past year. Margins averaged 49 cents/gal in June, higher than the previous five-year average for June of 44 cents/gal but lower than the 66 cents/gal average in June 2015, partly because of higher U.S. gasoline production and inventory levels. Monthly data show gasoline consumption in the United States during the first four months of 2016 averaged 2.5% higher than during the same period last year, and U.S. Department of Transportation data through April of this year show a record amount of vehicle miles traveled during that period.

The U.S. average regular gasoline retail price increased to $2.37/gal in June, 10 cents/gal higher than in May, reflecting higher crude oil prices. Monthly average retail gasoline prices for June 2016 ranged from a low of $2.12/gal in the Gulf Coast—Petroleum Administration for Defense District (PADD) 3—to a high of $2.73/gal in the West Coast (PADD 5). EIA expects the monthly average price of U.S. regular gasoline reached an annual peak in June of $2.37/gal, with lower prices expected in the second half of 2016.


Total U.S. liquid fuels consumption increased by an estimated 290,000 b/d (1.5%) in 2015. Liquid fuels consumption is forecast to increase by 170,000 b/d (0.9%) in 2016 and by an additional 120,000 b/d (0.6%) in 2017.

Motor gasoline consumption is forecast to increase by 130,000 b/d (1.5%) to 9.29 million b/d in 2016, which would make it the highest annual average gasoline consumption on record, beating the previous record set in 2007 by 0.1%. The increase in gasoline consumption reflects a forecast 2.5% increase in highway travel (because of employment growth and lower retail gasoline prices) that is partially offset by increases in vehicle fleet fuel economy. EIA forecasts that gasoline consumption in 2017 will be close to the 2016 average.

In 2015, jet fuel consumption increased by an estimated 70,000 b/d (4.7%). Forecast jet fuel consumption is mostly unchanged through the forecast period, with improvements in average airline fleet fuel economy offset by growth in freight and passenger travel.

Consumption of distillate fuel, which includes diesel fuel and heating oil, is expected to fall by 90,000 b/d (2.4%) in 2016, after falling by 60,000 b/d in 2015. Falling distillate consumption in 2016 is the result of relatively warm winter temperatures, reduced oil and natural gas drilling, and declining coal production, which has reduced diesel use in rail shipments of coal. Stronger expected economic growth in 2017 contributes to forecast distillate fuel consumption growth of 80,000 b/d (2.1%).

Hydrocarbon gas liquids (HGL) consumption is forecast to increase by 20,000 b/d in 2016 and by 60,000 b/d in 2017, as increased ethane consumption more than offsets reduced consumption of other HGL. U.S. ethane consumption is forecast to increase by 70,000 b/d (6.3%) in 2016, as expansion projects at ethylene-producing petrochemical plants increase feedstock demand for ethane. In 2017, forecast ethane consumption increases by an additional 80,000 b/d (7.4%), as five new petrochemical plants and a previously deactivated plant begin operations.

Figure 15: U.S. Liquid Fuels Consumption Growth


U.S. crude oil production is projected to decrease from an average of 9.4 million b/d in 2015 to 8.6 million b/d in 2016 and to 8.2 million b/d in 2017. The forecast reflects declining Lower 48 onshore production that is partly offset by growing production in the federal Gulf of Mexico. EIA estimates that total U.S. crude oil production has fallen by 1.1 million b/d since April 2015 to an average of 8.6 million b/d in June 2016. Almost all of the production decline was in the Lower 48 onshore.

Based on the current oil price forecast, EIA expects oil production to continue declining in most Lower 48 onshore oil production regions through mid-2017. The expectation of reduced cash flows in 2016 and 2017 has prompted many companies to scale back investment programs, deferring major new undertakings until a sustained price recovery occurs. The prospect of tighter lending conditions will likely limit the availability of capital for many smaller producers, giving rise to distressed asset sales and consolidation of acreage holdings by firms that are more financially sound. Lower onshore investment is expected to reduce the count of oil-directed rigs and well completions in 2016 and 2017.

The current price outlook is expected to limit onshore drilling activity and well completions, despite continued increases in rig and well productivity and falling drilling and completion costs. Average rig counts reported by Baker Hughes increased by 10 rigs from May to June, with an average of 417 total rigs in operation during June, down from more than 600 in January. In EIA's forecast, low rig counts continue to limit production through 2017.

EIA expects U.S. crude oil production to decline from 9.2 million b/d in the first quarter of 2016 to an average of 8.1 million b/d in the third quarter of 2017. Production of 8.1 million b/d would be 1.6 million b/d below the April 2015 level, which was the highest monthly production since April 1971. Production is expected to fall most rapidly from April through September 2016, declining by an average of 180,000 b/d each month. Production is then expected to be relatively flat from October 2016 through July 2017, averaging 8.2 million b/d. EIA's assumption of hurricane-related outages lowers the forecast third-quarter 2017 average to 8.1 million b/d, after which production is expected to begin to rise. Increases in production in late 2017 reflect productivity improvements, lower breakeven costs, and forecast oil price increases. The forecast remains sensitive to actual wellhead prices and rapidly changing drilling economics that vary across regions and operators.

Projected crude oil production during the forecast period rises in the Gulf of Mexico and falls in Alaska. Production in these areas is less sensitive to short-term price movements than onshore production in the Lower 48 states. These changes reflect anticipated growth from new projects in the Gulf of Mexico and declines from legacy fields in Alaska. Although production in Alaska is expected to decrease in response to BP's recent reduction in drilling rigs in the Alaska North Slope, ConocoPhillips brought two projects online and ExxonMobil brought another project online in the region that could moderate Alaska's production declines. In the Gulf of Mexico, the April 2016 start of the Julia oil field, along with other projects that will begin operations later in 2016 and 2017, is expected to help increase the region's production from an average of 1.5 million b/d in 2015 to 1.9 million b/d in the fourth quarter of 2017. Some projects may start production later than expected, potentially shifting some of the anticipated production gains from late 2017 into early 2018.

EIA projects HGL production at natural gas processing plants will increase by 0.2 million b/d (6.2%) in 2016 and by 0.3 million b/d (9.0%) in 2017. EIA expects higher ethane recovery rates in 2016 and 2017, following planned increases in demand for petrochemical plant feedstock in the United States and abroad. Planned terminal builds and expansions and a growing ship fleet allow more U.S. ethane, propane, and butanes to reach international markets, with forecast net HGL exports averaging 1.1 million b/d in 2016 and 1.4 million b/d in 2017.

Product Prices

EIA expects the retail price of regular gasoline will average $2.25/gal during the 2016 summer driving season (April through September), 2 cents/gal lower than projected in last month's STEO and 39 cents/gal lower than the price in summer 2015. EIA expects the U.S. average retail price of regular gasoline to reach a peak of $2.37/gal in June and then fall to an average of $2.19/gal in September. The U.S. regular gasoline retail price, which averaged $2.43/gal in 2015, is projected to average $2.12/gal in 2016 and $2.28/gal in 2017.

As refiners have adjusted yields in favor of gasoline because of relatively high gasoline margins over the past year, EIA expects gasoline production to be higher in summer 2016 compared with summer 2015, which should contribute to lower wholesale gasoline margins than last summer. However, gasoline margins are expected to be higher than the previous five-year average level. Any unplanned refinery outages or unexpected growth in demand could result in margins above forecast levels.

The diesel fuel retail price averaged $2.71/gal in 2015. Diesel prices are forecast to average $2.36/gal in 2016 and $2.71/gal in 2017.

U.S. Petroleum and Other Liquids
  2014 2015 2016 2017
Crude Oil prices (dollars per barrel)
WTI Spot Average 93.17 48.67 43.57 52.15
Brent Spot Average 98.89 52.32 43.73 52.15
Imported Average 89.63 46.35 39.67 48.73
Refiner Average Acquisition Cost 92.05 48.40 42.00 51.24
Retail prices including taxes (dollars per gallon)
Regular Gasoline 3.36 2.43 2.12 2.28
Diesel Fuel 3.83 2.71 2.36 2.71
Heating Oil 3.71 2.65 2.16 2.64
Production (million barrels per day)
Crude Oil 8.71 9.43 8.61 8.20
Natural Gas Plant Liquids 3.01 3.27 3.47 3.79
Fuel Ethanol 0.93 0.97 0.98 0.98
Biodiesel 0.083 0.082 0.099 0.106
Consumption (million barrels per day)
Motor Gasoline 8.92 9.16 9.29 9.31
Distillate Fuel Oil 4.04 3.98 3.88 3.96
Jet Fuel 1.47 1.54 1.56 1.56
Total Consumption 19.11 19.40 19.56 19.68
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 2.4 2.4 1.9 2.7
Heating Degree Days 1.9 -10.2 -2.6 4.0
Distillate-weighted Industrial Production 0.8 1.0 1.4 2.7

Interactive Data Viewers

Provides custom data views of historical and forecast data

STEO Custom Table Builder ›
Real Prices Viewer ›

In beta testing:

STEO Data browser ›

Related Articles    
Today In Energy Daily
This Week in Petroleum Weekly
2016 Summer Fuels Outlook Slideshow Apr-2016 PDF
2015-2016 Winter Fuels Outlook Slideshow Oct-2015 PDF
2015 Summer Fuels Outlook Slideshow Apr-2015 PDF
2014-2015 Winter Fuels Outlook Slideshow Oct-2014 PDF
2014 Outlook for Gulf of Mexico Hurricane-Related Production Outages Jun-2014 PDF
2014 Summer Fuels Outlook Slideshow Apr-2014 PDF
Energy-weighted industrial production indices Mar-2014 PDF
Key drivers for EIA's short-term U.S. crude oil production outlook Feb-2013 PDF
Change in STEO Regional and U.S. Degree Day Calculations Sep-2012 PDF
Brent Crude Oil Spot Price Forecast Jul-2012 PDF
2012 Outlook for Hurricane-Related Production Outages in the Gulf of Mexico Jun-2012 PDF
STEO Notice: Suspension of Regional Residential Heating Oil and Propane Price Forecast Jun-2011 PDF
Probabilities of Possible Future Prices Apr-2010 PDF
Energy Price Volatility and Forecast Uncertainty Oct-2009 PDF