SHORT TERM ENERGY OUTLOOK

ENERGY INFORMATION INSTITUTE


HIGHLIGHTS

  • The spot price of West Texas Intermediate (WTI) crude oil increased from $122 per barrel on June 4 to $145 per barrel on July 3. Global supply uncertainties, combined with significant demand growth in China, the Middle East, and Latin America are expected to continue to pressure oil markets. WTI prices, which averaged $72 per barrel in 2007, are projected to average $127 per barrel in 2008 and $133 per barrel in 2009.


  • Regular-grade gasoline is expected to average $3.84 per gallon in 2008, more than $1 per gallon above the 2007 average price. The U.S. average regular grade gasoline price, about $4.10 per gallon on June 30, is projected to remain over $4 per gallon until the fourth quarter of 2009. Retail diesel fuel prices, which averaged $2.88 in 2007, are projected to average $4.35 per gallon in 2008 and $4.48 per gallon in 2009.


  • World consumption of liquid fuels and other petroleum is projected to grow by almost 900,000 barrels per day (bbl/d) in 2008 and by an additional 1.4 million bbl/d in 2009, while U.S. consumption is expected to decline by about 400,000 bbl/d in 2008. Adjusting for increased ethanol use, U.S. petroleum consumption is projected to fall by 530,000 bbl/d in 2008.


  • The Henry Hub natural gas spot price averaged $7.17 per thousand cubic feet (Mcf) in 2007 and is expected to average $11.86 per Mcf in 2008 and $11.62 per Mcf in 2009.


  • Rapidly increasing delivered fuel costs for power generation, particularly for natural gas, are pushing up electricity prices. Residential electricity prices are projected to increase by an annual average of about 5.2 percent in 2008 and 9.8 percent in 2009 compared with an increase of 2.2 percent in 2007.



U.S. PETROLEUM

Production. In 2008, total domestic crude oil output is projected to average 5.14 million bbl/d, up slightly from the 2007 average of 5.10 million bbl/d (U.S. Crude Oil Production). Production growth in the Lower-48 region is expected to more than offset declines in Alaskan output. In 2009, total production is projected to increase to 5.27 million bbl/d, due mostly to the Thunder Horse and Tahiti platforms coming onstream in late 2008 and 2009, respectively. This projection includes an expectation of hurricane-induced outages of an estimated 11 million barrels for the offshore region in 2008 (see Hurricane Outlook). Fuel ethanol production is projected to increase from an annual average of 420,000 bbl/d in 2007 to 560,000 bbl/d in 2008 and to 640,000 bbl/d in 2009.

Consumption. Total petroleum consumption is projected to shrink by 400,000 bbl/d in 2008, a sharper drop than the nearly 300,000 bbl/d projected in the previous Outlook, based on prospects for a weak economy and record high crude oil and product prices extending into 2009 (U.S. Petroleum Products Consumption Growth). In 2009, total consumption is projected to remain almost flat at the 2008 level. Prices. WTI crude oil prices, which averaged $72 per barrel in 2007 (Crude Oil Prices), are projected to average $127 per barrel in 2008 and $133 per barrel in 2009.

Regular-grade motor gasoline retail prices, which averaged $2.81 per gallon in 2007, are projected to rise to an average of $3.84 per gallon this year and $4.06 per gallon in 2009. These prices hit a record of $4.10 per gallon on June 30. For the remainder of 2008, pump prices are projected to remain well above $4.00 per gallon. This forecast reflects very weak gasoline margins because of the decline in gasoline consumption and growth in ethanol supply.

Diesel fuel retail prices in 2008 are projected to average $4.35 per gallon, up from $2.88 per gallon last year, and increase to an average of $4.48 per gallon in 2009. These higher prices reflect strength in diesel demand, particularly in emerging markets, which has significantly increased the margins between diesel prices and crude oil costs from those of last year. Over the next few months, these prices are projected to remain near the June 30 price of $4.65 per gallon as refiner margins begin to weaken slightly, offsetting the projected rise in crude oil costs.

 

 

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