U.S. Oil Outlook: Consumption Higher With Economic Recovery

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U.S. Liquid Fuels Consumption. Preliminary data indicate that total consumption of petroleum and non-petroleum liquid fuels increased by 350,000 bbl/d (1.9 percent) in 2010 (U.S. Liquid Fuels Consumption Growth Chart). The major sources of consumption growth were distillate fuel oil (diesel fuel and heating oil), which grew by 130,000 bbl/d (3.7 percent), and motor gasoline, which increased by 60,000 bbl/d (0.7 percent). Reflecting the ongoing economic recovery, projected total U.S. liquid fuels consumption in 2011 increases by 160,000 bbl/d (0.8 percent) in 2011 and a further 170,000 bbl/d (0.9 percent), to 19.4 million bbl/d, in 2012. Motor gasoline and distillate fuel account for much of the growth in consumption over the next 2 years.

U.S. Liquid Fuels Supply and Imports. Domestic crude oil production, which increased by 150,000 bbl/d in 2010 to 5.51 million bbl/d, declines by 20,000 bbl/d in 2011 and by a further 130,000 bbl/d in 2012 (U.S. Crude Oil Production Chart). The 2011 forecast includes declines of 50,000 bbl/d in Alaska and 220,000 bbl/d in Federal Gulf of Mexico (GOM) production, which are almost offset by a projected 250,000-bbl/d increase in lower-48 non-GOM production. In 2012, lower-48 non-GOM output increases by 70,000 bbl/d, Alaskan production declines by 20,000 bbl/d, and GOM output decreases by 180,000 bbl/d.

Liquid fuel net imports (including both crude oil and refined products) fell from 57 percent of total U.S. consumption in 2008 to 49.4 percent in 2010, primarily because of the decline in consumption during the recession and rising exports. EIA forecasts that liquid fuel net imports will average 9.6 million bbl/d in 2011 and 9.9 million bbl/d in 2012, about 50 percent and 51 percent of total consumption, respectively.

EIA expects slow growth in fuel ethanol production over the next 2 years. EIA projects that ethanol production will increase by 6 percent (50,000 bbl/d) in 2011, reflecting the startup of several new plants and the restart of some plants that were idled during the recession. EIA projects that ethanol production growth will slow to 1 percent in 2012. Forecast ethanol blending into gasoline exceeds the conventional biofuels component of the Renewable Fuels Standard (RFS) in both 2011 and 2012.

U.S. Petroleum Product Prices. Projected regular-grade gasoline retail prices rise from an average of $2.78 per gallon in 2010 to $3.17 per gallon in 2011 and $3.29 per gallon in 2012. On-highway diesel fuel retail prices, which averaged $2.99 per gallon in 2010, average $3.40 per gallon and $3.52 per gallon in 2011 and 2012, respectively. Rising crude oil prices are the primary reason for higher retail prices, but higher gasoline and distillate refining margins are also expected to contribute to higher retail prices.

The projected monthly average regular gasoline price peaks this year at $3.27 per gallon in July. New York Harbor RBOB (Reformulated Blendstock for Oxygenate Blending) futures contracts for July 2011 delivery for the 5-day period ending January 6 averaged $2.52 per gallon and implied volatility averaged 29 percent. The probability the RBOB futures price will exceed $2.80 per gallon (and the retail price exceed $3.50 per gallon) in July 2011 is about 26 percent. The probability the RBOB futures price will exceed $3.30 per gallon (and the retail price exceed $4.00 per gallon) in July 2011 is about 7 percent.

Source: U.S. Energy Information Administration



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