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Short-Term Energy and Summer Fuels Outlook

Release Date: April 12, 2016  |  Next Release Date: May 10, 2016  |  Full Report    |   Text Only   |   All Tables   |   All Figures

U.S. Petroleum and Other Liquids

Growing domestic and global consumption of gasoline contributed to refinery wholesale gasoline margins (the difference between the wholesale price of gasoline and the price of Brent crude oil) averaging 48 cents/gallon (gal) in 2015, compared with the previous five-year average of 25 cents/gal. However, high gasoline inventories contributed to falling gasoline margins in February, which caused retail prices of regular gasoline to fall to an average of $1.76/gal for the month. U.S. average regular gasoline retail prices increased to $1.93/gal in March, driven by higher crude oil prices and increasing gasoline margins because of strong demand. Monthly average retail gasoline prices for March ranged from a low of $1.72/gal in the Gulf Coast (PADD 3) to a high of $2.38/gal in the West Coast (PADD 5). EIA expects the U.S. regular gasoline retail price to average $2.05/gal in April and $2.08/gal in June, followed by lower prices in the second half of 2016.

Liquid Fuels Consumption

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 120,000 b/d (0.6%) in 2016 and by an additional 190,000 b/d (1.0%) in 2017.

Motor gasoline consumption increased by an estimated 240,000 b/d (2.7%) in 2015 to an average of 9.2 million b/d, the highest level since the record 9.3 million b/d in 2007. Gasoline consumption is forecast to increase by 130,000 b/d (1.4%) in 2016, as a forecast 2.6% increase in highway travel (because of employment growth and low retail prices) is partially offset by continuing increases in vehicle fleet fuel economy. In 2017, forecast gasoline consumption is close to its 2016 level.

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 offsetting growth in freight and passenger travel.

Consumption of distillate fuel, which includes diesel fuel and heating oil, fell by 60,000 b/d (1.5%) in 2015, and it is expected to fall by an additional 70,000 b/d (1.8%) in 2016. Falling distillate consumption in 2016 is the result of warm winter temperatures, lower rates of oil and natural gas drilling activity, and falling coal production that has reduced diesel use in rail shipments of coal. Stronger economic growth in 2017 contributes to distillate fuel consumption growth of 140,000 b/d (3.5%).

HGL consumption is forecast to increase by 40,000 b/d (1.4%) in 2016 and by 50,000 b/d (2.0%) in 2017, as increased ethane consumption more than offsets reduced propane consumption. U.S. ethane consumption is forecast to increase by 60,000 b/d (6.1%) 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 (6.8%), as capacity begins to ramp up at five new petrochemical plants and at a previously deactivated plant.

Liquid Fuels Supply

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 8.0 million b/d in 2017. The forecast reflects a decline in Lower 48 onshore production driven by persistently low oil prices that is partially offset by growing production in the federal Gulf of Mexico.

EIA estimates total U.S. crude oil production has fallen by 0.7 million b/d since April 2015 to an average of 9.0 million b/d in March 2016. The entire production decline came from Lower 48 onshore.

Because WTI crude oil prices are projected to remain below $40/b through the first half of 2017, EIA expects oil production to decline in most Lower 48 onshore oil production regions. 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 higher interest rates and 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 more financially sound firms. Lower onshore investment is expected to reduce the count of oil-directed rigs and well completions in 2016 and 2017.

Projected low oil prices throughout the forecast period are expected to limit onshore drilling activity and well completions, despite continued increases in rig and well productivity and falling drilling and completion costs. Rig counts reported by Baker Hughes continue to decline, with the average number of total rigs in operation during March at less than 450, down from more than 600 in January. The decline in rig counts continues to reduce EIA's forecast of future drilling and production throughout the forecast period.

EIA expects U.S. crude oil production to decline from 9.1 million b/d in the first quarter of 2016 to an average of 7.9 million b/d in the third quarter of 2017. Production of 7.9 million b/d would be 1.8 million b/d below the April 2015 level, which was the highest monthly production since April 1971. Production is expected to begin increasing modestly in the fourth quarter of 2017, reflecting productivity improvements, lower breakeven costs, and anticipated 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 than onshore production in the Lower 48 states to short-term price movements and reflects 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 Alaskan North Slope, ConocoPhillips brought two projects online there that could moderate production declines in the region. Several projects in the Gulf of Mexico that began operations or that will begin operations in 2014-16 will increase 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 (6.1%) in 2016 and by 0.3 million b/d (7.6%) in 2017. EIA expects higher ethane recovery rates in 2016 and 2017, following planned increases to petrochemical plant feedstock demand 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 1.3 million b/d in 2017. In March, the United States shipped the first waterborne exports of ethane from the Marcus Hook, Pennsylvania, terminal to Europe.

Petroleum Product Prices

U.S. Petroleum and Other Liquids
  2014 2015 2016 2017
Crude Oil prices (dollars per barrel)
WTI Spot Average 93.17 48.67 34.60 40.58
Brent Spot Average 98.89 52.32 34.73 40.58
Imported Average 89.63 46.36 31.12 37.20
Refiner Average Acquisition Cost 92.05 48.42 33.59 39.67
Retail prices including taxes (dollars per gallon)
Regular Gasoline 3.36 2.43 1.94 2.00
Diesel Fuel 3.83 2.71 2.11 2.33
Heating Oil 3.72 2.65 1.97 2.18
Production (million barrels per day)
Crude Oil 8.71 9.43 8.60 8.04
Natural Gas Plant Liquids 3.01 3.27 3.47 3.74
Fuel Ethanol 0.93 0.97 0.98 0.97
Biodiesel 0.083 0.082 0.100 0.106
Consumption (million barrels per day)
Motor Gasoline 8.92 9.16 9.29 9.28
Distillate Fuel Oil 4.04 3.98 3.91 4.04
Jet Fuel 1.47 1.54 1.54 1.55
Total Consumption 19.11 19.40 19.52 19.71
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 2.4 2.4 2.1 2.9
Heating Degree Days 1.9 -10.2 -3.1 6.7
Distillate-weighted Industrial Production 2.5 1.4 1.8 3.0

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