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Short-Term Energy Outlook

Release Date: March 10, 2015  |  Next Release Date: April 7, 2015  |  Full Report    |   Text Only   |   All Tables   |   All Figures

U.S. Petroleum and Other Liquids

U.S. average regular gasoline retail prices have increased for six consecutive weeks to $2.49/gal as of March 9, after falling to $2.04/gal on January 26, the lowest price in EIA's weekly survey of Monday prices since April 6, 2009. Rising crude oil prices, along with several outages at refineries on the West Coast, have contributed to the recent increase in retail gasoline prices.

In February, monthly average regional gasoline retail prices ranged from a low of $1.96/gal in Petroleum Administration for Defense District (PADD) 4, the Rocky Mountain region, to a high of $2.55/gal in PADD 5 along the West Coast. EIA expects U.S. retail gasoline prices to average $2.26/gal during the first quarter of 2015 and $2.39/gal for the full year, $0.13/gal and $0.05/gal higher than in last month's STEO, respectively.

Liquid Fuels Consumption

Total U.S. liquid fuels consumption rose by an estimated 70,000 bbl/d (0.4%) in 2014. Motor gasoline consumption increased by 80,000 bbl/d (0.9%) reflecting an increase in highway travel that was partially offset by fleetwide increases in fuel efficiency. Distillate consumption grew by 180,000 bbl/d (4.8%) in 2014, as a result of colder-than-average weather in the first quarter as well as increases in industrial production. Jet fuel consumption increased by 40,000 bbl/d (2.5%). Hydrocarbon gas liquids (HGL) and residual fuel oil consumption in 2014 fell by an estimated 100,000 bbl/d (4.0%) and 60,000 bbl/d (19.2%), respectively.

In 2015, total liquid fuels consumption is forecast to grow by 310,000 bbl/d (1.6%). Lower pump prices contribute to a 70,000 bbl/d increase (0.8%) in motor gasoline consumption. EIA expects petrochemical plants to use more HGL as feedstock, which will reverse 2014's decline in HGL consumption, increasing by 160,000 bbl/d (6.8%). Consumption of distillate fuel is projected to increase by 80,000 bbl/d (2.0%), driven partially by expanding industrial production. Additionally, 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. The increase in marine distillate use because of MARPOL regulations will displace the use of residual fuel oil.

EIA projects that in 2016 liquid fuels consumption growth will slow to 70,000 bbl/d (0.4%). Motor gasoline consumption is projected to decline by 50,000 bbl/d (0.6%), as the annual average retail regular gasoline price is projected to increase by 14% from the 2015 level. Continuing industrial growth contributes to an 80,000 bbl/d (3.1%) increase in HGL consumption and a 50,000 bbl/d (1.2%) increase in distillate consumption. Jet fuel consumption remains unchanged, as the effects of moderate increases in air transport activity offset the effects of improved fuel efficiency brought about by the introduction of new aircraft.

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 to 9.5 million bbl/d in 2016. With WTI crude oil prices expected to average $47/bbl in the first half of 2015, EIA expects 2015 onshore 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 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 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. Furthermore, a reduction of the backlog of wells drilled but not completed, which runs three to seven months in major producing regions, will bolster production by offsetting recent drops in drilling activity.

Nevertheless, EIA expects crude oil production to reach 9.4 million bbl/d in the second quarter of 2015, then decline by 170,000 bbl/d in the third quarter. With projected WTI crude oil prices rising in the second half of 2015, drilling activity is expected to increase again as companies take advantage of lower costs for acreage leasing and drilling services, resulting in growing production despite the relatively low WTI price. 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 onshore production in the Lower 48 states.

HGL production at natural gas liquids 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. Ethane and propane are expected to contribute most to the projected growth, with most of the production supplying domestic petrochemical demand or exports. 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 oil production has contributed to a significant decline in imports of crude oil and other liquids. 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 20% in 2016, which would be the lowest level since 1968.

Petroleum Product Prices

U.S. regular gasoline retail prices averaged $2.22/gal in February, $0.10/gal more than in January, which had the lowest monthly average price since April 2009. The U.S. regular gasoline retail price, which averaged $3.36/gal in 2014, is projected to average $2.39/gal in 2015, $0.05/gal higher than forecast in last month's STEO, and $2.73/gal in 2016, unchanged from last month's STEO. Diesel fuel retail prices, which averaged $3.83/gal in 2014, are projected to fall to an average of $2.89/gal in 2015, $0.05/gal higher than in last month's STEO, and then rise to $3.25/gal in 2016.

The June 2015 New York Harbor reformulated blendstock for oxygenate blending (RBOB) futures contract averaged $1.91/gal for the five trading days ending March 5, 2015, and has a 27% probability of exceeding $2.10/gal (consistent with a retail price of $2.75/gal) at expiration. The current values of futures and options contracts suggest there is a 10% 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 3% 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.

Despite the recent cold weather, home heating costs this winter are still expected to be lower than last winter for households using heating oil or propane. Lower projected crude oil prices this winter compared with last winter contribute to retail heating oil prices that are expected to average $3.02/gal this winter, $0.86/gal lower than last winter. The average household that uses heating oil as its primary space-heating fuel is now expected to spend $1,784 for heating this winter, about $570 less than last winter. With propane supplies more ample this winter compared with last winter, propane prices are expected to be 16% lower in the Northeast and 27% lower in the Midwest, resulting in households spending 18% and 32% 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 52.15 70.00
Brent Spot Average 108.60 99.00 59.50 75.03
Imported Average 98.12 89.65 48.56 66.53
Refiner Average Acquisition Cost 100.46 92.01 51.20 69.05
Retail prices including taxes (dollars per gallon)
Regular Gasoline 3.51 3.36 2.39 2.73
Diesel Fuel 3.92 3.83 2.89 3.25
Heating Oil 3.78 3.72 2.82 3.05
Production (million barrels per day)
Crude Oil 7.45 8.65 9.35 9.49
Natural Gas Plant Liquids 2.61 2.96 3.23 3.51
Fuel Ethanol 0.87 0.94 0.95 0.94
Biodiesel 0.089 0.081 0.084 0.084
Consumption (million barrels per day)
Motor Gasoline 8.84 8.92 9.00 8.94
Distillate Fuel Oil 3.83 4.01 4.09 4.14
Jet Fuel 1.43 1.47 1.48 1.47
Total Consumption 18.96 19.03 19.34 19.41
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 2.2 2.4 2.7 2.4
Heating Degree Days 18.5 1.9 -3.7 -3.8
Distillate-weighted Industrial Production 2.9 3.4 2.5 3.2

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