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Short-Term Energy Outlook

Release Date: June 9, 2015  |  Next Release Date: July 7, 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 $2.78/gal on June 1, an increase of 37¢/gal from early April. Rising crude oil prices and ongoing refinery outages in the Midwest and West Coast have pushed gasoline prices higher in the past two months. As a result of outages on the West Coast, gasoline prices in that region have increased by more than the U.S. average, with prices in Petroleum Administration for Defense District (PADD) 5 averaging $3.44/gal on June 1, an increase of 49¢/gal from the first week in April. In May, monthly average regional gasoline retail prices ranged from a low of $2.44/gal in PADD 3, the Gulf Coast region, to a high of $3.47/gal in PADD 5, the West Coast. EIA expects gasoline prices to fall from their current peaks, with the U.S. regular gasoline price averaging $2.43/gal over the second half 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 370,000 b/d (2.0%). EIA projects liquid fuels consumption growth will slow to 70,000 b/d (0.4%) in 2016. The 2015 and 2016 consumption forecasts are about 40,000 b/d higher than in last month's STEO.

Motor gasoline consumption, which rose by 80,000 b/d in 2014, increases by a projected 130,000 b/d (1.4%) in 2015 as the effects of employment growth and lower gasoline prices outweigh increases in vehicle fleet efficiency. Gasoline consumption is forecast to fall by 20,000 b/d (0.2%) 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 90,000 b/d (2.3%) in 2015 and by 50,000 b/d (1.2%) in 2016. This growth is driven by increasing manufacturing output, foreign trade, and marine fuel use.

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 50,000 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.

Liquid Fuels Supply

U.S. crude oil production is projected to increase from an average of 8.7 million b/d in 2014 to 9.4 million b/d in 2015 and then decline to 9.3 million b/d in 2016. The forecast is 0.2 million b/d and 0.1 million b/d higher for 2015 and 2016, respectively, than in last month's STEO. The increase in the crude oil production forecast reflects upward revisions to estimated production in the first quarter of 2015.

EIA estimates that U.S. crude oil production averaged almost 9.6 million b/d in May 2015. This level is almost 0.4 million b/d higher than the average production during the fourth quarter of 2014, despite the 60% decline in the total U.S. oil-directed rig count since October 2014. Production has increased as producers work through the backlog of uncompleted wells (completing more wells than they are drilling) and achieve potentially better completions with higher initial production rates.

EIA expects U.S. crude oil production will begin to decline in June, with continuing declines through early 2016, when total production is forecast to average 9.2 million b/d in the first quarter. Production is forecast to begin rising in the second half of 2016, returning to an average of 9.6 million b/d in December as new projects are scheduled to come online in the Gulf of Mexico.

Projected crude oil production declines from June 2015 through February 2016 are largely attributable to unattractive economic returns in some areas of both emerging and mature onshore oil production regions, as well as seasonal factors such as anticipated hurricane-related production disruptions in the Gulf of Mexico. Reductions in 2015 capital expenditures and cash flows have prompted companies to defer investment or redirect investment away from marginal exploration and research drilling to focus on core areas of major tight oil plays. Reduced investment has resulted in the lowest count of oil-directed rigs in five years.

Projected 2015 oil prices remain high enough to support continued development drilling in the core areas of the Bakken, Eagle Ford, Niobrara, and Permian basins. Forecast WTI crude oil prices create conditions in which continued increases in rig and well productivity and falling drilling and completion costs make resumption of onshore production growth possible in 2016. The forecast remains particularly sensitive to actual prices available at the wellhead and rapidly changing drilling economics that vary across regions and operators. Projected production in the Gulf of Mexico rises during the forecast period, while Alaska production 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 is estimated to have reached a record level of 3.2 million b/d in May 2015, and it is projected to average 3.2 million b/d in 2015 and 3.4 million b/d in 2016. EIA expects higher ethane recovery rates following planned increases in petrochemical plant feedstock demand. Export terminal expansions will allow higher quantities of domestically produced ethane, 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 refinery outages in the Midwest and West Coast contributed to an increase in U.S. regular gasoline retail prices from a monthly average of $2.47/gal in April to $2.72/gal in May. EIA expects monthly average prices to decline through the summer as refineries in the Midwest and West Coast 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 $2.52/gal during the third quarter of 2015 and $2.33/gal in the fourth quarter.

The U.S. regular gasoline retail price, which averaged $3.36/gal in 2014, is projected to average $2.44/gal in 2015, 1¢/gal higher than in last month's STEO, and $2.55/gal in 2016, which is 8¢/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, unchanged from last month's STEO, and then rise to $3.04/gal in 2016, 9¢/gal lower than in last month's STEO.

As with 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 reformulated blendstock for oxygenate blending (RBOB) futures contracts for September 2015 delivery traded over the five-day period ending June 4 averaged $1.97/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 September 2015 is about 10%.

U.S. Petroleum and Other Liquids
  2013 2014 2015 2016
Crude Oil prices (dollars per barrel)
WTI Spot Average 97.98 93.17 55.35 62.04
Brent Spot Average 108.56 98.89 60.53 67.04
Imported Average 98.12 89.57 51.95 58.58
Refiner Average Acquisition Cost 100.46 92.02 54.45 61.06
Retail prices including taxes (dollars per gallon)
Regular Gasoline 3.51 3.36 2.44 2.55
Diesel Fuel 3.92 3.83 2.88 3.04
Heating Oil 3.78 3.72 2.84 2.89
Production (million barrels per day)
Crude Oil 7.47 8.71 9.43 9.27
Natural Gas Plant Liquids 2.61 2.96 3.22 3.44
Fuel Ethanol 0.87 0.94 0.94 0.93
Biodiesel 0.089 0.081 0.090 0.098
Consumption (million barrels per day)
Motor Gasoline 8.84 8.92 9.05 9.03
Distillate Fuel Oil 3.83 4.01 4.10 4.15
Jet Fuel 1.43 1.47 1.50 1.50
Total Consumption 18.96 19.03 19.41 19.48
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 2.2 2.4 2.2 2.6
Heating Degree Days 18.5 1.9 -3.0 -4.2
Distillate-weighted Industrial Production 2.9 3.5 1.8 3.0

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