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Short-Term Energy Outlook

Release Date: June 7, 2016  |  Next Release Date: July 12, 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 May, higher than the five-year average of 45 cents/gal but lower than the 55 cents/gal average in May 2015.

The U.S. average regular gasoline retail price increased to $2.27/gal in May, 16 cents/gal higher than in April, reflecting higher crude oil prices. Monthly average retail gasoline prices for May 2016 ranged from a low of $2.02/gal in the Gulf Coast—Petroleum Administration for Defense District (PADD) 3-to a high of $2.65/gal in the West Coast (PADD 5). EIA expects the monthly average price of U.S. regular gasoline to reach an annual peak in June of $2.36/gal, followed by lower prices 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 230,000 b/d (1.2%) in 2016 and by an additional 60,000 b/d (0.3%) in 2017.

Motor gasoline consumption increased by an estimated 240,000 b/d (2.7%) in 2015 to an average of 9.16 million b/d. Gasoline consumption is forecast to increase by 170,000 b/d (1.8%) to 9.33 million b/d in 2016, which would be the highest annual average gasoline consumption on record. The previous annual average high was 9.29 million b/d in 2007. The increase in consumption reflects a forecast 2.5% increase in highway travel (because of employment growth and low retail gasoline prices) that is partially offset by increases in vehicle fleet fuel economy. EIA forecasts gasoline consumption in 2017 will be 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 offset by 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 60,000 b/d (1.5%) in 2016. Falling distillate consumption in 2016 is the result of relatively warm winter temperatures, reduced oil and natural gas drilling, and falling 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 70,000 b/d (1.9%).

Hydrocarbon gas liquids (HGL) consumption is forecast to increase by 40,000 b/d in both 2016 and 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 (6.5%) 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 (7.0%), as capacity begins to ramp up at five new petrochemical plants and at a previously deactivated plant.


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 a decline in Lower 48 onshore production that is partially offset by growing production in the federal Gulf of Mexico.

EIA estimates that total U.S. crude oil production has fallen by more than 0.9 million b/d since April 2015 to an average of 8.7 million b/d in May 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 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 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. Rig counts reported by Baker Hughes continue to decline, with an average of 407 total rigs in operation during May, down from more than 600 in January. In EIA's forecast, the decline in rig counts continues 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 170,000 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 Alaskan 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 several other projects in the region that began operations in 2014-15 or that will begin operations later in 2016, are 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 (6.3%) in 2016 and by 0.3 million b/d (8.3%) 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-grade gasoline will average $2.21/gal during the 2016 summer driving season (April through September), 17 cents/gal higher than forecast in last month's STEO, but 42 cents/gal lower than the price in summer 2015. Higher forecast prices compared with the April STEO reflect higher forecast crude oil prices and higher gasoline demand during the summer. The projected monthly average retail price of gasoline increases from $2.11/gal in April to a peak of $2.28/gal in June before falling to $2.12/gal in September.

The U.S. regular gasoline retail price, which averaged $2.43/gal in 2015, is projected to average $2.08/gal in 2016, which is 14 cents/gal higher than projected in last month's STEO. U.S. regular gasoline retail prices are forecast to average $2.24/gal in 2017.

In 2015, higher gasoline demand in the United States and abroad contributed to wholesale gasoline margins significantly above five-year average levels. Strong gasoline demand, along with changes in the U.S. vehicle fleet in response to fuel economy standards, led to higher prices for high-octane gasoline blending components, which also contributed to the above-average gasoline margins for most of 2015. Continuing demand growth and many of the same conditions that tightened octane markets and led to high wholesale gasoline margins in 2015 still exist. EIA expects refinery runs and gasoline production to be higher in summer 2016 compared with last summer, which should contribute to wholesale gasoline margins that are lower than last summer. However, EIA forecasts gasoline margins will still be higher than the five-year average level. Additionally, any unplanned refinery outages or unexpected growth in demand could result in margins increasing above their forecast levels.

The diesel fuel retail price, which averaged $2.71/gal in 2015, is forecast to average $2.27/gal in 2016 and $2.64/gal in 2017, which is 16 cents/gal and 31 cents/gal higher than in last month's STEO, respectively. Higher diesel prices in this month's STEO reflect higher forecast crude oil prices.

U.S. Petroleum and Other Liquids
  2014 2015 2016 2017
Crude Oil prices (dollars per barrel)
WTI Spot Average 93.17 48.67 42.83 51.82
Brent Spot Average 98.89 52.32 43.03 51.82
Imported Average 89.63 46.37 38.90 48.39
Refiner Average Acquisition Cost 92.05 48.41 41.39 50.91
Retail prices including taxes (dollars per gallon)
Regular Gasoline 3.36 2.43 2.13 2.27
Diesel Fuel 3.83 2.71 2.34 2.69
Heating Oil 3.71 2.65 2.16 2.61
Production (million barrels per day)
Crude Oil 8.71 9.43 8.60 8.19
Natural Gas Plant Liquids 3.01 3.27 3.48 3.77
Fuel Ethanol 0.93 0.97 0.98 0.98
Biodiesel 0.083 0.082 0.100 0.106
Consumption (million barrels per day)
Motor Gasoline 8.92 9.16 9.33 9.32
Distillate Fuel Oil 4.04 3.98 3.92 3.99
Jet Fuel 1.47 1.54 1.55 1.55
Total Consumption 19.11 19.40 19.62 19.68
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 2.4 2.4 1.7 3.0
Heating Degree Days 1.9 -10.3 -2.1 4.2
Distillate-weighted Industrial Production 0.8 1.0 1.5 3.0

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