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Short-Term Energy and Summer Fuels Outlook

Release Date: April 7, 2015  |  Next Release Date: May 12, 2015  |  Full Report    |   Text Only   |   All Tables   |   All Figures

U.S. Petroleum and Other Liquids

U.S. average regular gasoline retail prices averaged $2.46/gal in March, rising from $2.04/gal on January 26, the lowest price in EIA's weekly survey of Monday prices since April 6, 2009. In March, monthly average regional gasoline retail prices ranged from a low of $2.21/gal in Petroleum Administration for Defense District (PADD) 3, the Gulf Coast region, to a high of $3.10/gal in PADD 5 along the West Coast.

Although crude oil prices are projected to be relatively flat in the coming months, the spring switchover from winter-grade to summer-grade gasoline is expected to contribute to a slight increase in U.S. regular gasoline retail prices from an average of $2.46/gal in March to a 2015 peak of $2.50/gal in April. EIA expects U.S. retail gasoline prices to average $2.40/gal for the full year of 2015.

For the first time, EIA is providing monthly data on rail movements of crude oil, which have significantly increased over the past five years. Total movements of crude oil by rail within the United States and between the United States and Canada were more than 1 million bbl/d in 2014, up from 55,000 bbl/d in 2010. In January 2015, shipments from PADD 2, which is the location of the Bakken tight oil formation, to PADD 1 on the East Coast accounted for about 40% of total crude oil shipped via rail in the United States including movements to and from Canada.

Liquid Fuels Consumption

Total U.S. liquid fuels consumption rose by an estimated 70,000 bbl/d (0.4%) in 2014. In 2015, total liquid fuels consumption is forecast to grow by 330,000 bbl/d (1.7%). EIA projects that in 2016, liquid fuels consumption growth will slow to 90,000 bbl/d (0.5%).

Motor gasoline consumption, which rose by 80,000 bbl/d in 2014, increases by a projected 150,000 bbl/d (1.6%) in 2015 and then falls by 70,000 bbl/d (0.8%) in 2016, as higher prices next year remove some of the stimulus to current consumption growth. Compared with last month's STEO, EIA revised the gasoline consumption forecasts upward by 70,000 bbl/d in 2015 and by 50,000 bbl/d in 2016 because of the larger-than-expected growth in gasoline consumption over the past six months, strong employment growth, and upward revisions in the Federal Highway Administration highway travel statistics of 0.8% in 2013 and 0.7% in 2014. Over the past six months (October 2014-March 2015), gasoline consumption increased by an average of 2.7% from the same period last year, compared with 0.2% year-over-year growth during the six months before that period. According to the U.S. Bureau of Labor Statistics monthly employment survey, seasonally adjusted employment increased by 1.6 million between October 2014 and March 2015.

Hydrocarbon gas liquids (HGL) consumption, which fell by 100,000 bbl/d (4.0%) in 2014, is projected to increase by 110,000 bbl/d in both 2015 and 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 bbl/d in 2014 to 1.0 million bbl/d in 2016. HGL consumption is rising because of strong supply growth, with HGL production at natural gas processing plants forecast to increase by 550,000 bbl/d (19%) between 2014 and 2016.

Liquid Fuels Supply

U.S. crude oil production is projected to increase from an average of 8.7 million bbl/d in 2014 to 9.2 million bbl/d in 2015 and to 9.3 million bbl/d in 2016, which is 0.1 million bbl/d and 0.2 million bbl/d lower than forecast in last month's STEO, respectively. The reduction in the crude oil production forecast reflects rig counts falling faster than EIA had initially expected, as oil-directed rigs have declined to the lowest level in more than four years as of late March.

With WTI crude oil prices expected to average $48/bbl in the second quarter of 2015, EIA expects 2015 onshore production to decline beginning in that period 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 reach 9.4 million bbl/d in the second quarter of 2015, then decline by 210,000 bbl/d in the third quarter. With projected WTI crude oil prices rising to an average of $57/bbl in the second half of 2015, drilling activity is expected to increase again as companies take advantage of lower costs for acreage leasing, drilling, and well-completion services, resulting in growing production despite the relatively low WTI price. Furthermore, a reduction of the backlog of wells drilled but not completed will bolster production by offsetting recent drops in drilling activity. 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 backlog of well completions 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 bbl/d in October, is projected to average 3.2 million bbl/d in 2015 and 3.5 million bbl/d in 2016. EIA expects higher rates of ethane recoveries as a result of 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.

U.S. Petroleum and Other Liquids
  2013 2014 2015 2016
Crude Oil prices (dollars per barrel)
WTI Spot Average 97.91 93.26 52.48 70.00
Brent Spot Average 108.60 99.00 59.32 75.03
Imported Average 98.12 89.57 49.05 66.53
Refiner Average Acquisition Cost 100.46 92.02 51.65 69.05
Retail prices including taxes (dollars per gallon)
Regular Gasoline 3.51 3.36 2.40 2.73
Diesel Fuel 3.92 3.83 2.86 3.24
Heating Oil 3.78 3.72 2.81 3.04
Production (million barrels per day)
Crude Oil 7.46 8.68 9.23 9.31
Natural Gas Plant Liquids 2.61 2.96 3.21 3.52
Fuel Ethanol 0.87 0.94 0.94 0.94
Biodiesel 0.089 0.081 0.082 0.084
Consumption (million barrels per day)
Motor Gasoline 8.84 8.92 9.07 9.00
Distillate Fuel Oil 3.83 4.01 4.07 4.14
Jet Fuel 1.43 1.47 1.48 1.49
Total Consumption 18.96 19.03 19.36 19.45
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 2.2 2.4 2.7 2.3
Heating Degree Days 18.5 2.0 -3.9 -4.6
Distillate-weighted Industrial Production 2.9 3.5 2.6 2.8

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