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Short-Term Energy Outlook

Release Date: January 13, 2015  |  Next Release Date: February 10, 2015  |  Full Report    |   Text Only   |   All Tables   |   All Figures

U.S. Petroleum and Other Liquids

U.S. weekly regular gasoline retail prices averaged $2.14/gal on January 12, a decrease of $0.64/gal since the beginning of December and the lowest weekly price since May 4, 2009. Regional gasoline retail prices ranged from a low of $1.91/gal in Petroleum Administration for Defense District (PADD) 3 to a high of $2.49/gal in PADD 5. U.S. average regular gasoline retail prices are now down more than 40% from their summer peak in late June. Falling Brent crude oil prices have been largely responsible for falling retail gasoline prices. EIA expects retail gasoline prices to average $2.16/gal during the first quarter of 2015 and $2.33/gal for the full year.

Liquid Fuels Consumption

Total U.S. liquid fuels consumption rose by an estimated 100,000 bbl/d (0.5%) in 2014. Motor gasoline consumption increased by 100,000 bbl/d (1.1%) because of increases in highway travel. Distillate consumption grew by 170,000 bbl/d (4.6%), as a result of colder-than-average weather in the first quarter as well as increases in industrial production during the year. Jet fuel usage increased by 30,000 bbl/d (2.3%). Hydrocarbon gas liquids (HGL) and residual fuel oil consumption fell by an estimated 100,000 bbl/d (4.0%) and 70,000 bbl/d (22%), respectively, in 2014.

In 2015, total liquid fuels consumption is forecast to grow by 260,000 bbl/d (1.4%). Lower pump prices result in a slight increase in motor gasoline consumption in 2015, but a decline in sales is expected with higher prices in the following year. HGL consumption is expected to reverse 2014's decline and increase by 110,000 bbl/d (4.7%) in 2015.

Distillate consumption is projected to increase by 60,000 bbl/d (1.5%) in 2015 based on forecast assumptions of continuing economic growth. Some of the growth in distillate fuel consumption comes from Annex VI to the International Convention for the Prevention of Pollution from Ships (MARPOL Annex VI), which is an international agreement that generally requires the use of fuels below 1,000 parts per million sulfur by marine vessels in most U.S. waters, unless alternative devices, procedures, or compliance methods are used to achieve equivalent emissions reductions. This increase in marine distillate use because of MARPOL regulations will displace the use of residual fuel oil.

In 2016, EIA projects more moderate growth in liquid fuels consumption of 110,000 bbl/d (0.5%). HGL growth accounts for most of the overall growth, with HGL consumption projected to grow by 100,000 bbl/d (3.9%). EIA projects that distillate fuel consumption increases by 60,000 bbl/d (1.5%) in 2016, while residual fuel oil consumption stabilizes near the 2015 level.

Liquid Fuels Supply

Forecast U.S. crude oil production increases from an average of 8.7 million bbl/d in 2014 to 9.3 million bbl/d in 2015 and 9.5 million b/d in 2016. With WTI crude oil prices expected to average $49/bbl in the first half of 2015, EIA expects 2015 drilling activity to decline because of unattractive economic returns in some areas of both emerging and mature oil production regions. Many companies have begun redirecting investment away from marginal exploration and research drilling and focusing on core areas of major tight oil plays. Oil prices remain high enough to support some development drilling activity in 2015 in the Bakken, Eagle Ford, Niobrara, and Permian Basin, albeit lower than previously forecast. Companies that have lower drilling and debt costs and have acreage in the sweet spots of these regions will continue to drill highly productive wells in 2015. Nevertheless, EIA expects 2015 production to reach 9.4 million bbl/d in the second quarter, then decline by 190,000 bbl/d in the third quarter. With projected WTI crude oil prices starting to rise in the second half of 2015, drilling activity is expected to increase again as companies take advantage of lower costs for both leasing acreage and drilling services, causing production to resume rising at a relatively low WTI crude oil price. However, this forecast remains particularly sensitive to actual prices available at the wellhead and drilling economics that vary across regions and operators. Projected production for the Federal offshore region and Alaska, which rise and fall respectively, are less sensitive to short-term price movements than Lower 48 onshore production.

HGL production at natural gas liquids plants, which reached a record high of 3.1 million bbl/d in October, is projected to increase to 3.3 million bbl/d by the end of 2015. Ethane and propane are expected to contribute most to the projected growth, with most of the production supplying domestic petrochemical use or exports. EIA expects higher rates of ethane recoveries as a result of planned increases in petrochemical facility 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 production has contributed to a significant decline in crude oil and other liquids imports. The share of total U.S. liquid fuels consumption met by net imports fell from 60% in 2005 to an estimated 27% in 2014. EIA expects the net import share to decline to 20% in 2016, which would be the lowest level since 1968.

Petroleum Product Prices

U.S. average regular gasoline retail prices fell from a monthly average of $3.69/gal in June to $2.54/gal in December, the lowest monthly average since July 2009. EIA expects that U.S. regular gasoline retail prices will fall to an average of $2.13/gal in January 2015. The U.S. regular gasoline retail price, which averaged $3.36/gal in 2014, is projected to average $2.33/gal in 2015, $0.26/gal lower than in last month's STEO, and $2.72/gal in 2016. Diesel fuel retail pump prices, which averaged $3.83/gal in 2014, are projected to fall to an average of $2.85/gal in 2015 but rise to $3.25/gal in 2016.

The April 2015 New York Harbor reformulated blendstock for oxygenate blending (RBOB) futures contract averaged $1.63/gal for the five trading days ending January 8, 2015. An RBOB futures contract price of $1.63/gal is consistent with a monthly average regular-grade gasoline retail price less than $2.35/gal in April 2015. The current values of futures and options contracts suggest there is a 2% probability that the RBOB futures contract price at expiration may exceed $2.35/gal, consistent with a retail price of $3.00/gal or higher, and a 17% probability that the RBOB futures price may fall below $1.35/gal, consistent with a retail price of $2.00/gal or lower. Daily and weekly national average prices can differ significantly from monthly and seasonal averages, and there are also significant differences across regions, with monthly average prices in some areas falling above or below the national average price by $0.30/gal or more.

Lower projected crude oil prices also contribute to a reduction in the forecast residential heating oil price and average household heating oil expenditures this winter compared with last winter. The average household that uses heating oil as its primary space heating fuel is expected to pay an average of $2.90/gal this winter, $0.98/gal lower than last winter. The average household is now expected to spend $1,586 for heating oil this winter, $767 lower than last winter. Propane prices are expected to be 17% lower in the Northeast and 27% lower in the Midwest, resulting in households spending 24% and 35% less on propane in those regions, respectively.

U.S. Petroleum and Other Liquids
  2013 2014 2015 2016
Crude Oil prices (dollars per barrel)
WTI Spot Average 97.91 93.26 54.58 71.00
Brent Spot Average 108.64 99.02 57.58 75.00
Imported Average 98.12 89.09 51.26 67.52
Refiner Average Acquisition Cost 100.46 91.73 53.71 70.05
Retail prices including taxes (dollars per gallon)
Regular Gasoline 3.51 3.36 2.33 2.72
Diesel Fuel 3.92 3.83 2.85 3.25
Heating Oil 3.78 3.71 2.71 3.03
Production (million barrels per day)
Crude Oil 7.45 8.67 9.31 9.53
Natural Gas Plant Liquids 2.61 2.96 3.19 3.51
Fuel Ethanol 0.87 0.93 0.94 0.94
Biodiesel 0.089 0.081 0.084 0.084
Consumption (million barrels per day)
Motor Gasoline 8.84 8.94 9.00 8.96
Distillate Fuel Oil 3.83 4.00 4.06 4.12
Jet Fuel 1.43 1.47 1.47 1.47
Total Consumption 18.96 19.06 19.32 19.43
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 2.2 2.2 2.5 2.4
Heating Degree Days 18.5 2.0 -6.4 -0.6
Distillate-weighted Industrial Production 2.9 3.5 2.8 3.7

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