U.S. Liquid Fuels

Consumption. EIA forecasts that total U.S. petroleum and other liquid fuels consumption will average 20.6 million barrels per day (b/d) in 2020, an increase of 160,000 b/d (0.8%) from the 2019 level. Forecast consumption growth slows to 70,000 b/d (0.3%) in 2020. Increased forecast consumption of hydrocarbon gas liquids (HGL) is the primary reason for the growth.

HGL consumption increased by an estimated 150,000 b/d (5.0%) in 2019, and EIA expects that it will increase by 170,000 b/d (5.3%) in 2020 and by 120,000 b/d (3.6%) in 2021. Ethane, used as a petrochemical feedstock, is responsible for most of the forecast growth in HGL consumption. Ethane consumption is expected to increase by 290,000 b/d in 2020 as outages at existing petrochemical steam cracking plants come back online and several new plants ramp up operations. EIA anticipates ethane consumption will increase by 130,000 b/d in 2021 as cracking plants increase their utilization and an additional plant comes online.

Motor gasoline consumption in the United States averaged 9.3 million b/d in 2019. EIA forecasts U.S. gasoline consumption will stay near that level in 2020 and then fall by 50,000 b/d (0.6%) in 2021. In 2020, gasoline consumption is supported by forecast growth in employment and population, but that support is balanced by expected gains in vehicle fuel efficiency. However, as employment growth in the forecast slows in 2021, the effects of vehicle fuel efficiency gains contribute to the forecast decrease in consumption in 2021.

EIA forecasts that distillate fuel consumption in the United States will increase by 40,000 b/d (1.1%) in 2020 and remain flat in 2021. Forecast U.S. distillate fuel consumption will average about 4.1 million b/d in both years. The consumption growth in 2020 is driven by assumed U.S. real gross domestic product (GDP) growth of 2.0% in 2020 and 1.8% in 2021. The flat distillate consumption growth from 2020 to 2021 reflects a decline in heating oil consumption in 2021 that is offset by increased diesel fuel consumption as a result of GDP growth. The diesel fuel consumption growth also reflects a small expected shift to marine diesel for bunkering purposes as a result of the International Maritime Organization (IMO) 2020 change to marine fuel sulfur specifications.

EIA forecasts U.S. jet fuel consumption will grow by 30,000 b/d (1.6%) in 2020 and by 10,000 b/d (0.4%) in 2021, reaching almost 1.8 million b/d. Growth in the demand for air travel is a result, in part, of expectations of rising disposable incomes.

Crude Oil Supply. EIA estimates that annual average U.S. crude oil production reached a new record of 12.2 million b/d in 2019, up 1.3 million b/d from 2018. EIA forecasts U.S. crude oil production to average 13.3 million b/d in 2020 and 13.7 million b/d in 2021. More production from the Lower 48 states’ onshore regions, especially the Permian region, drives the forecast increase.

Slowing crude oil production growth in the forecast results from a decline in drilling rigs over the past year that EIA expects will continue into 2020 and 2021. Despite the decline in the number of rigs, EIA forecasts production will continue to grow as rig efficiency and well-level productivity rises. For 2020, EIA’s WTI crude oil price forecast rises by $2 per barrel (b) from 2019 levels to average $59/b for the year. For 2021, EIA expects WTI prices will rise further to an average of $62/b. EIA expects oil prices above $60/b to contribute to rising crude oil production, as producers will be able to fund drilling programs through cash flow and other funding sources, despite a somewhat more restrictive capital market.

EIA estimates that onshore crude oil production in the Lower 48 states averaged 9.9 million b/d in 2019, up from 8.8 million b/d in 2018. In 2020, EIA expects Lower 48 production will increase by almost 1.0 million b/d and rise by another 0.4 million b/d in 2021. Almost all of the Lower 48 production growth can be attributed to production from tight oil formations within the Permian region in Texas and New Mexico, which account for 0.8 million b/d of the Lower 48 production growth expected by EIA in 2020 and almost 0.4 million b/d in 2021. Favorable geology and technological and operational improvements have allowed the Permian region to become one of the most prolific regions for oil production.

EIA expects crude oil production in the Gulf of Mexico will average 2.0 million b/d in 2020, an increase of 0.1 million b/d over 2019 levels. Production in 2021 is expected to stay flat at 2.0 million b/d.

Crude oil production in Alaska in the forecast remains unchanged at 0.5 million b/d during 2020 and 2021.

Hydrocarbon Gas Liquids Supply. EIA forecasts HGL production at natural gas processing plants will increase from an estimated 4.8 million b/d in 2019 to 5.4 million b/d in 2020 and to 5.5 million b/d in 2021. HGLs produced at natural gas plants—ethane, propane, butanes, and natural gasoline—will increase along with growth in natural gas production and natural gas processing plant capacity. EIA expects ethane will contribute more than two-thirds of the 0.7 million b/d HGL production growth between 2019 and 2021. Higher rates of ethane recovery at natural gas processing plants are expected to help meet growing demand for ethane as a petrochemical feedstock in the United States and abroad.

Liquid Biofuels. On December 19, 2019, the U.S. Environmental Protection Agency (EPA) finalized a rule setting Renewable Fuel Standard (RFS) volumes for 2020 and biomass-based diesel volumes for 2021. EIA used these final volumes to develop the forecasts for liquid biofuels for 2020 and 2021. EIA expects that the largest effect of the current RFS targets will continue to be on biomass-based diesel production and net imports, which help to meet multiple RFS targets for biomass-based diesel, advanced biofuel, and total renewable fuel. Biodiesel production fell by nearly 2% from 2018 to 2019, averaging an estimated 119,000 b/d last year. EIA expects biodiesel production will increase by 13% to average 135,000 b/d in 2020 and increase by 17% to average 158,000 b/d in 2021, driven largely by increasing RFS targets and the renewal of the biodiesel production tax credit through 2022.

Net imports of biomass-based diesel increased by 47% to an average 23,000 b/d in 2019, and EIA expects them to increase further to an average 28,000 b/d in 2020 and to 39,000 b/d in 2021. Increased net imports of biomass-based diesel are driven primarily by increased volumes of renewable diesel imported to meet both California Low Carbon Fuel Standard requirements and the rising RFS targets.

As a result of limited demand growth and oversupply, U.S. ethanol producers experienced weakening operating margins and ethanol production fell for the first time in seven years in 2019, down 2.0% from 2018 levels to an average of 1.03 million b/d. EIA forecasts that limited domestic and global demand growth potential will result in ethanol production staying largely unchanged in 2020 and 2021. Ethanol consumption averaged 951,000 b/d in 2019, and EIA forecasts a slight decrease to an average 947,000 b/d in 2020 and 945,000 b/d in 2021, driven by falling motor gasoline consumption by 2021. This level of consumption results in the ethanol share of total gasoline, which was an estimated 10.1% in 2018 and 10.2% in 2019, remaining largely flat in 2020 and 2021. This stable ethanol share assumes growth in higher-level ethanol blends is limited by a combination of unfavorable blending economics compared with gasoline, depressed Renewable Identification Number (RIN) prices, and limited consumer demand for higher levels of ethanol blending beyond 10% of gasoline (i.e., E10).

Product Prices. EIA expects the retail price of regular gasoline in the United States will average $2.54 per gallon (gal) during the first quarter of 2020, 18 cents/gal higher than at the same time last year, primarily reflecting stronger expected refinery margins despite similar forecast crude oil prices. EIA expects the U.S. monthly regular retail gasoline price will increase from an average of $2.57/gal in January to $2.76/gal in June and July (a 2020 peak) before falling to $2.53/gal in December 2020. The U.S. regular gasoline retail price, which averaged $2.60/gal in 2019, is forecast to average $2.63/gal in both 2020 and 2021.

Regional annual average forecast prices for 2020 range from a low of $2.36/gal in the Gulf Coast region—Petroleum Administration for Defense District (PADD) 3—to a high of $3.24/gal in the West Coast region (PADD 5).

Refinery wholesale gasoline margins in the United States (the difference between the wholesale price of gasoline and the price of Brent crude oil) averaged 15 cents/gal in December 2019. This level was similar to the average in December 2018, but it was 10 cents/gal lower than the five-year (2014–18) average for December. Refinery wholesale gasoline margins averaged 32 cents/gal in 2019, which was 4 cents/gal higher than the 2018 level but 5 cents/gal lower than the five-year average. EIA expects the refinery wholesale gasoline margin will average 33 cents/gal in 2020 and 27 cents/gal in 2021.

The diesel fuel retail price averaged $3.06/gal in 2019, which was 13 cents/gal lower than the average in 2018. EIA forecasts the diesel price will average $3.11/gal in 2020 and $3.12/gal in 2021. The rising prices from 2019 to 2020 primarily reflect the assumption that diesel refinery margins increase because of IMO 2020 regulations, which became effective on January 1. EIA expects that low-sulfur IMO regulations will drive global demand for U.S. ultra-low sulfur diesel volumes and contribute to gradually increasing diesel refinery margins. Diesel refinery margins based on Brent crude oil, which averaged 43 cents/gal in 2019, are expected to average 50 cents/gal in 2020 and 49 cents/gal in 2021.