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Short-Term Energy Outlook

Release Date: December 9, 2014  |  Next Release Date: January 13, 2015  |  Full Report    |   Text Only   |   All Tables   |   All Figures

U.S. Petroleum and Other Liquids

U.S. weekly regular gasoline retail prices averaged $2.78/gal on December 1, which marked a decrease of $0.21/gal since the beginning of November and the lowest weekly price average since October 4, 2010. U.S. average regular gasoline retail prices have fallen for nine consecutive weeks and are down by 25% since their summer peak in late June. Falling Brent crude oil prices have been largely responsible for falling retail gasoline prices. EIA expects that the current low crude oil prices will contribute to further declines in gasoline prices, with the December price expected to average $2.61/gal.

Liquid Fuels Consumption

Total U.S. liquid fuels consumption rose by 470,000 bbl/d (2.5%) in 2013, the largest increase since 2004. Consumption of hydrocarbon gas liquids (HGL) registered the largest gain, increasing by 190,000 bbl/d (8.5%). In 2014, total liquid fuels consumption is expected to remain unchanged, with declines in the consumption of HGL, residual fuel oil, and other oils offsetting increases in distillate fuel and jet fuel. Total consumption is forecast to grow by 140,000 bbl/d in 2015, with HGL and distillate consumption accounting for most of the growth.

Motor gasoline consumption grew by 160,000 bbl/d (1.9%) in 2013, the largest increase since 2004. EIA expects gasoline consumption to remain mostly unchanged during the forecast period, as modest increases projected for 2014 are offset by small declines in 2015. This projection shows that continued improvements in new-vehicle fuel economy offset highway travel growth.

Distillate fuel consumption increases by 120,000 bbl/d (3.1%) in 2014, reflecting colder-than-average first-quarter weather and economic growth. Distillate consumption rises by an additional 90,000 bbl/d (2.2%) in 2015. Some of the growth in distillate fuel consumption in 2015 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.

Residual fuel oil consumption, which falls to an estimated 240,000 bbl/d in 2014, is projected to decline further to 210,000 bbl/d in 2015, which would be the lowest level on record.

Liquid Fuels Supply

Forecast U.S. crude oil production increases from an average of 7.4 million bbl/d in 2013 to 8.6 million bbl/d in 2014 and 9.3 million bbl/d in 2015. Recent onshore Lower 48 states oil production has been higher than expected, causing an upward revision of 155,000 bbl/d from the previous forecast in the fourth quarter of 2014. However, given the reduction in the 2015 crude oil price forecast, with WTI crude oil prices expected to average $58/bbl in the second quarter of 2015, EIA expects 2015 drilling activity to decline due to unattractive economic returns in some areas of both emerging and mature oil production regions. Many companies will redirect investment away from marginal exploration and research drilling and into core areas of major tight oil plays. Oil prices remain high enough to support development drilling activity in the Bakken, Eagle Ford, Niobrara, and Permian Basin, which contribute the majority of U.S. oil production growth. The Gulf of Mexico oil production forecast has been revised downward this month by 95,000 bbl/d in 2015, as some projects which started producing in 2014 are ramping up production slower than initially expected, while other projects' start dates have been pushed back into late 2014 and early 2015.

HGL production at natural gas liquids plants, which reached a record high of 3.1 million bbl/d in September, 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 the majority of production directed towards 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 petroleum imports. The share of total U.S. liquid fuels consumption met by net imports fell from 60% in 2005 to an average of 33% in 2013. EIA expects the net import share to decline to 21% in 2015, which would be the lowest level since 1969.

Petroleum Product Prices

U.S. average regular gasoline retail prices fell from a monthly average of $3.69/gal in June to $2.91/gal in November, the first month in which prices have averaged below $3.00/gal since December 2010. EIA expects that U.S. regular gasoline retail prices will fall to an average of $2.61/gal in December 2014. The U.S. regular gasoline retail price, which averaged $3.51/gal in 2013, is projected to average $3.37/gal in 2014 and $2.60/gal in 2015. Forecast retail gasoline prices for 2015 are $0.35/gal lower than in last month's STEO. Diesel fuel prices, which averaged $3.92/gal in 2013, are projected to fall to an average of $3.82/gal in 2014 and $3.07/gal in 2015. Forecast diesel fuel prices for 2015 are $0.31/gal lower than in last month's STEO.

The February 2015 New York Harbor reformulated blendstock for oxygenate blending (RBOB) futures contract averaged $1.85/gal for the five trading days ending December 4, 2014. An RBOB futures contract price of $1.85/gal is consistent with a monthly average regular-grade gasoline retail price less than $2.50/gal in March 2015. There is a 4% 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. 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 to last winter. The average household that uses heating oil as its primary space heating fuel is expected to pay an average of $3.09/gal this winter, $0.79/gal lower than last winter. The average household is now expected to spend $1,722 for heating oil this winter, $57 lower than in last month's STEO.

U.S. Petroleum and Other Liquids
  2012 2013 2014 2015
Crude Oil prices (dollars per barrel)
WTI Spot Average 94.12 97.91 93.82 62.75
Brent Spot Average 111.65 108.64 99.54 68.08
Imported Average 101.09 98.12 89.95 59.27
Refiner Average Acquisition Cost 100.82 100.46 92.30 61.78
Retail prices including taxes (dollars per gallon)
Regular Gasoline 3.63 3.51 3.37 2.60
Diesel Fuel 3.97 3.92 3.82 3.07
Heating Oil 3.79 3.78 3.70 2.96
Production (million barrels per day)
Crude Oil 6.50 7.44 8.60 9.32
Natural Gas Plant Liquids 2.41 2.61 2.96 3.22
Fuel Ethanol 0.86 0.87 0.93 0.95
Biodiesel 0.064 0.089 0.080 0.084
Consumption (million barrels per day)
Motor Gasoline 8.68 8.84 8.89 8.86
Distillate Fuel Oil 3.74 3.83 3.95 4.03
Jet Fuel 1.40 1.43 1.46 1.46
Total Consumption 18.49 18.96 18.96 19.10
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 2.3 2.2 2.2 2.4
Heating Degree Days -12.5 18.5 3.8 -8.2
Distillate-weighted Industrial Production 2.9 2.9 3.3 2.9

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