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Short-Term Energy Outlook

Release Date: January 9, 2018  |  Next Release Date: February 6, 2018  |  Full Report    |   Text Only   |   All Tables   |   All Figures

U.S. Liquid Fuels

Consumption. Total U.S. petroleum and other liquid fuels consumption is forecast in the STEO to average 20.3 million barrels per day (b/d) in 2018, an increase of 470,000 b/d (2.4%) from the 2017 level. Consumption is forecast to grow by 340,000 b/d (1.7%) in 2019. The growth in both years is led primarily by higher consumption of hydrocarbon gas liquids (HGL) and distillate fuel with modest contributions of growth in motor gasoline and jet fuel.

EIA forecasts HGL consumption growth to be the strongest among the liquid fuels. HGL consumption is expected to increase by 300,000 b/d (11.7%) in 2018 and by 260,000 b/d (9.1%) in 2019, with increased ethane consumption accounting for about three quarters of this growth. Seven (six new and one restarted) ethylene-producing petrochemical plants that use ethane as their feedstock are planned to begin operating in the United States by the end of 2019.

Distillate consumption averaged more than 3.9 million b/d during 2017, an increase of 50,000 b/d from 2016 levels. Distillate fuel consumption growth is forecast to accelerate in 2018, with expected annual average growth of 100,000 b/d (2.5%), resulting in average consumption of more than 4.0 million b/d, followed by growth of 10,000 b/d (0.4%) in 2019. U.S. economic activity and industrial output are projected to grow strongly in both 2018 and 2019, contributing to higher distillate use.

Motor gasoline consumption remained nearly flat from 2016 to 2017 at an average of slightly more than 9.3 million b/d. Motor gasoline consumption is forecast to increase by 30,000 b/d (0.3%) in 2018. If EIA’s projected growth is realized, it would be the highest level of annual average gasoline consumption on record, slightly surpassing the previous record set in 2016. Gasoline consumption growth in 2019 is forecast to accelerate slightly, increasing by 50,000 b/d (0.6%) from 2018 levels. Moderate growth in disposable personal income and declining unemployment rates, tempered by increases in motor gasoline prices, contribute to modest increases in forecast vehicle miles traveled throughout 2019.

Jet fuel consumption increased sharply in 2017, growing by 70,000 b/d compared with 2016, averaging almost 1.7 million b/d. However, year-over-year growth in jet fuel consumption is expected to slow in 2018, with growth of 20,000 b/d (1.4%) in 2018 and less than 10,000 b/d (0.4%) in 2019. Growth in the demand for air travel from rising disposable income is offset somewhat by rising jet fuel prices.

Supply. EIA forecasts total U.S. crude oil production to average 10.3 million b/d in 2018, up 1.0 million b/d from 2017. If achieved, forecast 2018 production would be the highest annual average on record, surpassing the previous record of 9.6 million b/d set in 1970. In 2019, crude oil production is forecast to rise to an average of 10.8 million b/d.

Increased production from tight rock formations within the Permian region in Texas and New Mexico accounts for 0.8 million b/d of the expected 1.2 million b/d of crude oil production growth from December 2017 to December 2019. EIA expects most of the remaining 0.3 million b/d of growth to come from the Federal Gulf of Mexico, as seven new projects are expected to come online by the end of 2019.

The Permian region is expected to produce 3.6 million b/d of crude oil by the end of 2019, which is roughly a 0.9 million b/d increase from estimated December 2017 levels and would represent about 32% of total U.S. crude oil production in 2019. The Permian region is the geographic area that predominately spans the Permian Basin of western Texas and southeastern New Mexico and covers 53 million acres. Within the Permian Basin are smaller sub-basins, including the Midland Basin and the Delaware Basin, all of which contain historically prolific non-tight formations as well as many prolific tight formations such as the Wolfcamp, Spraberry, and Bonespring. With the large geographic area of the Permian region and stacked plays, operators can continue to develop multiple tight oil layers and increase production, even with sustained prices lower than $50/b. Increases in proppant intensity, lateral lengths, changes to slick-water completions, and drilling in sweet spots have driven increased initial production (IP) rates and rig activity in the Permian, allowing it to remain one of the most economic regions for oil production. The Permian region rig count is projected to grow from about 398 at the end of 2017 to 490 at the end of 2019.

Production from the Eagle Ford region is expected to be between 1.2 million b/d and 1.3 million b/d in 2018 and 2019, slightly higher than the 2017 level. Compared with the Permian, the Eagle Ford region has a significantly smaller geographic area (16 million acres), fewer prolific stacked formations, and fewer opportunities to drill. However, similar to the Permian, Eagle Ford wells have high IP rates and fast decline rates, requiring the continuous drilling of new wells to maintain production levels. Historically, rig counts have been very responsive to price changes in the Eagle Ford region. Consequently, they have been declining since May 2017 because of oil prices dropping below $50/b in mid-2017. With EIA’s forecast WTI price averaging $55/b in 2018 and $57/b in 2019, Eagle Ford rigs are expected to grow from 80 at the end of 2017 to 95 at the end of 2019.

The Bakken region is expected to produce an average of 1.2 million b/d in 2018 and 1.3 million b/d in 2019, up from 1.1 million b/d in 2017. The Bakken region predominately spans the Williston Basin that contains the Bakken and Three Forks formations. Although the Bakken region is geographically large (23 million acres), it contains fewer identified prolific formations than the Permian region. In addition, operators in this region are affected by winter weather and have greater transportation constraints in moving oil to refineries and markets. Rig counts in this region are expected to grow from 49 at the end of 2017 to 69 at the end of 2019.

The Bakken region is expected to produce an average of 1.2 million b/d in 2018 and 1.3 million b/d in 2019, up from 1.1 million b/d in 2017. The Bakken region predominately spans the Williston Basin that contains the Bakken and Three Forks formations. Although the Bakken region is geographically large (23 million acres), it contains fewer identified prolific formations than the Permian region. In addition, operators in this region are affected by winter weather and have greater transportation constraints in moving oil to refineries and markets. Rig counts in this region are expected to grow from 49 at the end of 2017 to 69 at the end of 2019.

Gulf of Mexico production is forecast to average 1.7 million b/d in 2018, which would be relatively unchanged from 2017 levels, and then increase to 1.8 million b/d in 2019. The anticipated start of production in 2019 from the Appomattox project in the Rydberg field and the Mars projects in the Kaikias field, along with other projects that will begin operations in 2018 and 2019, are expected to contribute to increases in production from the Gulf of Mexico.

Crude oil production in Alaska is expected to remain flat at 0.5 million b/d in both 2018 and 2019. Ongoing exploration and developmental drilling in the North Slope and the anticipated start of production from 1H News project in November 2017 and the Greater Moose’s Tooth project in 2018 are expected to keep production in Alaska from declining as it has been in recent years.

Growth in crude oil production, especially in the Permian Basin, is expected to result in increased associated natural gas production and natural gas processing. EIA forecasts HGL production at natural gas processing plants will increase by 0.5 million b/d in 2018 and by 0.4 million b/d in 2019. EIA expects higher ethane recovery rates in 2018 and 2019, following planned increases in demand for petrochemical plant feedstock in the United States and abroad.

Product Prices. EIA expects the retail price of regular gasoline to average $2.51 per gallon (gal) during the first quarter of 2018, 19 cents/gal higher than at the same time last year, primarily reflecting higher crude oil prices. EIA expects that the U.S. monthly retail price of regular gasoline will increase from an average of $2.54/gal in January to a 2018 peak of $2.63/gal in August before falling to $2.47/gal in December 2018. The U.S. regular gasoline retail price, which averaged $2.42/gal in 2017, is forecast to average $2.57/gal in 2018 and $2.58 /gal in 2019.

Regional annual average forecast prices for 2018 range from a low of $2.29/gal in the Gulf Coast— Petroleum Administration for Defense District (PADD) 3—to a high of $3.03/gal in the West Coast (PADD 5).

Refinery wholesale gasoline margins (the difference between the wholesale price of gasoline and the price of Brent crude oil) averaged 25 cents/gal in December. This level was lower than the 32 cents/gal average in December 2016, but it was 8 cents/gal higher than the five-year average for December. Refinery wholesale gasoline margins averaged 41 cents/gal in 2017, which was relatively unchanged from the 2016 level but 8 cents/gal higher than the previous five-year average. Refinery wholesale gasoline margins are expected to average 37 cents/gal in 2018 and 34 cents/gal in 2019.

The diesel fuel retail price averaged $2.65/gal in 2017, which was 34 cents/gal higher than the average in 2016. The diesel price is forecast to average $2.95/gal in 2018 and $3.01/gal in 2019, driven higher primarily by higher crude oil prices and growing global diesel demand. Rising diesel consumption is expected to contribute to gradually increasing diesel refinery margins. Diesel refinery margins based on Brent crude oil are expected to average 47 cents/gal in 2018 and 46 cents/gal in 2019, compared with an average of 40 cents/gal in 2017.

U.S. Petroleum and Other Liquids
  2016201720182019
Crude Oil prices (dollars per barrel)
WTI Spot Average 43.3350.7955.3357.43
Brent Spot Average 43.7454.1559.7461.43
Imported Average 38.7048.2651.7653.87
Refiner Average Acquisition Cost 40.6950.0854.3456.43
Retail prices including taxes (dollars per gallon)
Regular Gasoline 2.152.422.572.58
Diesel Fuel 2.312.652.953.01
Heating Oil 2.102.542.842.84
Production (million barrels per day)
Crude Oil 8.869.3010.2710.85
Natural Gas Plant Liquids 3.513.714.214.57
Fuel Ethanol 1.001.031.031.03
Biodiesel 0.1020.1050.1170.128
Consumption (million barrels per day)
Motor Gasoline 9.329.309.339.39
Distillate Fuel Oil 3.883.934.034.04
Jet Fuel 1.611.681.711.72
Total Consumption 19.6919.8420.3120.65
Primary Assumptions (percent change from previous year)
U.S. Real GDP Growth 1.52.32.42.4
Heating Degree Days -5.1-1.711.2-0.6
Distillate-weighted Industrial Production 1.73.13.22.5

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