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Short-Term Energy Outlook

Release Date: May 12, 2015  |  Next Release Date: June 9, 2015  |  Full Report    |   Text Only   |   All Tables   |   All Figures

U.S. Petroleum and Other Liquids

U.S. weekly regular gasoline retail prices reached a 2015 high of $2.69/gal on May 11, an increase of 28¢/gal from early April. Rising crude oil prices and a series of refinery outages in California have pushed gasoline prices higher in the past month. As a result of these outages, gasoline prices on the West Coast have increased by more than the U.S. average, with prices in Petroleum Administration for Defense District (PADD) 5 averaging $3.44/gal on May 11, an increase of 49¢/gal from the first week in April. In April, monthly average regional gasoline retail prices ranged from a low of $2.23/gal in PADD 3, the Gulf Coast region, to a high of $3.01/gal in PADD 5, along the West Coast.

With crude oil prices projected to be relatively flat in the coming months, the U.S. monthly average gasoline price is projected to reach $2.68/gal in May, then decline as refineries in California resolve outages and refineries in the rest of the country increase production of gasoline following the spring maintenance season. EIA projects regular gasoline retail prices to average $2.51/gal during the third quarter and $2.43/gal for the full year of 2015.

Liquid Fuels Consumption

Total U.S. liquid fuels consumption rose by an estimated 70,000 b/d (0.4%) in 2014. In 2015, total liquid fuels consumption is forecast to grow by 340,000 b/d (1.8%). EIA projects that in 2016, liquid fuels consumption growth will slow to 70,000 b/d (0.4%).

Motor gasoline consumption, which rose by 80,000 b/d in 2014, increases by a projected 120,000 b/d (1.4%) in 2015 as lower prices and employment growth outweigh increases in vehicle fleet efficiency. Gasoline consumption is forecast to fall by 50,000 b/d (0.6%) in 2016, driven by higher prices and a long-term trend toward more-efficient vehicles.

Consumption of distillate fuel, which includes diesel fuel and heating oil, is forecast to rise by 80,000 b/d (2.0%) in 2015 and by 60,000 b/d (1.5%) in 2016. This growth is driven by increasing manufacturing output and foreign trade. Additionally, some of the growth in distillate fuel consumption comes from the implementation of Annex VI to the International Convention for the Prevention of Pollution from Ships (MARPOL Annex VI), which will increase marine distillate use in U.S. waters because of provisions that displace the use of some residual fuel oil.

Hydrocarbon gas liquids (HGL) consumption, which fell by 100,000 b/d (4.0%) in 2014, is projected to increase by 120,000 b/d in 2015 and by 60,000 b/d in 2016, as new petrochemical plant capacity increases the use of HGL as a feedstock. In addition, new HGL export terminal capacity contributes to an increase in HGL net exports from an average of 560,000 b/d in 2014 to 1.0 million b/d in 2016. HGL consumption rises as additional natural gas processing and pipeline capacity make HGL supplies more accessible, with HGL production forecast to increase by 520,000 b/d (17%) between 2014 and 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 remain flat in 2016. The 2015 and 2016 production forecasts are 40,000 b/d and 100,000 b/d lower than in last month's STEO, respectively. The reduction in the crude oil production forecast reflects a reduced WTI price forecast for 2016 in this STEO and a sustained drop in rig counts beyond what EIA had initially expected. Oil-directed rigs declined to the lowest level in almost five years as of early May.

EIA expects onshore production to decline beginning in the second quarter of 2015 because of unattractive economic returns in some areas of both emerging and mature oil production regions. Reductions in 2015 capital expenditures, cash flows, and low-cost credit availability have encouraged companies to defer investment or redirect investment away from marginal exploration and research drilling to focus on core areas of major tight oil plays. Projected 2015 oil prices remain high enough to support continued development drilling activity in the core areas of the Bakken, Eagle Ford, Niobrara, and Permian basins. Companies with lower drilling and debt-service costs that operate on acreage in the sweet spots of these regions are expected to continue to drill highly productive wells in 2015.

EIA expects U.S. crude oil production to exceed 9.3 million b/d in the second quarter of 2015, then decline by 280,000 b/d through the first quarter of 2016. With forecast WTI crude oil prices rising to an average of $67/b in the second quarter of 2016, drilling activity is expected to increase again. Companies are expected to take advantage of lower costs for acreage leasing, drilling, and well-completion services, resulting in growing production beginning in the second quarter of 2016. However, the forecast remains particularly sensitive to actual prices available at the wellhead, drilling economics that vary across regions and operators, and whether additional production from the completion of backlogged wells materializes. Projected production in the federal offshore region rises during the forecast period, while production in Alaska falls. Production in these areas is less sensitive to short-term price movements than is onshore production in the Lower 48 states.

HGL production at natural gas processing plants, which reached a record high of 3.1 million b/d in October, is projected to average 3.2 million b/d in 2015 and 3.5 million b/d in 2016. EIA expects higher ethane recovery rates following planned increases in petrochemical plant feedstock demand, while export terminal expansions will allow higher quantities of domestically produced propane and butanes to reach the international market.

The growth in domestic crude oil and other liquids production has contributed to a significant decline in imports. The share of total U.S. liquid fuels consumption met by net imports fell from 60% in 2005 to an estimated 26% in 2014. EIA expects the net import share to decline to 21% in 2016, which would be the lowest level since 1969.

Petroleum Product Prices

Rising crude oil prices and several California refinery outages contributed to an increase in U.S. regular gasoline retail prices from a monthly average of $2.47/gal in April to $2.69/gal on May 11. The U.S. monthly average gasoline price is projected to reach $2.68/gal in May, and then decline as refineries in California resolve outages and refineries in the rest of the country increase production of gasoline following the spring maintenance season. EIA projects regular gasoline retail prices to average $2.51/gal during the third 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, 3¢/gal higher than in last month's STEO, and $2.63/gal in 2016, which is 10¢/gal lower than in last month's STEO. The diesel fuel retail price, which averaged $3.83/gal in 2014, is projected to fall to an average of $2.88/gal in 2015 and then rise to $3.12/gal in 2016.

As in the case of crude oil, the market's expectation of uncertainty in monthly average gasoline prices is reflected in the pricing and implied volatility of futures and options contracts. New York Harbor RBOB futures contracts for August 2015 delivery traded over the five-day period ending May 7 averaged $2.00/gal. The probability that the RBOB futures price will exceed $2.35/gal (consistent with a U.S. average regular gasoline retail price above $3.00/gal) in August 2015 is about 12%.

U.S. Petroleum and Other Liquids
  2013 2014 2015 2016
Crude Oil prices (dollars per barrel)
WTI Spot Average 97.98 93.17 54.32 65.57
Brent Spot Average 108.56 98.89 60.79 70.49
Imported Average 98.12 89.57 50.80 62.08
Refiner Average Acquisition Cost 100.46 92.02 53.26 64.57
Retail prices including taxes (dollars per gallon)
Regular Gasoline 3.51 3.36 2.43 2.63
Diesel Fuel 3.92 3.83 2.88 3.12
Heating Oil 3.78 3.72 2.86 2.94
Production (million barrels per day)
Crude Oil 7.46 8.66 9.19 9.21
Natural Gas Plant Liquids 2.61 2.96 3.22 3.48
Fuel Ethanol 0.87 0.94 0.94 0.94
Biodiesel 0.089 0.081 0.081 0.084
Consumption (million barrels per day)
Motor Gasoline 8.84 8.92 9.05 8.99
Distillate Fuel Oil 3.83 4.01 4.09 4.15
Jet Fuel 1.43 1.47 1.48 1.49
Total Consumption 18.96 19.03 19.37 19.44
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 2.2 2.4 2.6 2.4
Heating Degree Days 18.5 1.9 -3.0 -4.2
Distillate-weighted Industrial Production 2.9 3.5 1.6 2.7

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