|Past and forecast US Fuel consumption. Click to enlarge.|
Despite a recent drop in oil prices, the US Energy Information Administration (EIA) projects the WTI (West Texas Intermediate) crude oil spot price to average around $70 per barrel for the rest of 2006 and 2007. The EIA made its projection in the September edition of the Short Term Energy Outlook (STEO).
The EIA expects the price of gasoline to fall to an average $2.55 per gallon by January 2007 prior to rising again into next summer. The national average retail price of regular motor gasoline fell from $3.04 per gallon on 7 August 2006 to $2.62 per gallon on 11 September 2006.
The EIA projects world petroleum consumption growth of 1.2 million barrels per day (bpd) in 2006 and 1.7 million bpd in 2007 despite the continuing prices. Those estimates reflect a downward revision for the second consecutive STEO in response to slower-than-expected demand growth in the Organization for Economic Cooperation and Development (OECD) countries.
More than half of the demand growth in 2007 is projected to come from two countries: the United States and China. Demand growth is also projected to be strong in the oil-exporting countries of the Middle East, which are benefiting from their current high oil revenues.
The EIA anticipates that existing and potential supply problems through the world will continue to raise concern through 2007, and expects only a slight increase in world crude production.
Although OECD inventories began the second quarter at the upper end of their past 5-year range for this time of year, when measured on the basis of how many days of demand the current supply could actually meet, OECD inventories were only in the middle of their observed 5-year range. By the end of 2007, EIA projects days of supply of OECD inventories to finish at the bottom of the 5-year range for that time of year, which is expected to make the market even tighter.
The US market. Average US oil production is expected to decline by 23,000 bpd, or 0.4% in 2006, to a level slightly below 5.1 million bpd. For 2007, EIA projects an average production rate of roughly 5.5 million bpd, reflecting recovery from the 2005 hurricanes that depressed Gulf of Mexico production in the first half of 2006, as well as the startup of new deepwater production.
The EIA projects total US petroleum consumption to be unchanged in 2006 compared with 2005, but anticipates 2.0% growth in consumption in 2007 to 21.1 million barrels per day. Gasoline consumption in 2006 will increase by 1% from 2005, according to the Outlook, and will increase by another 1.2% to 9.33 million barrels per day in 2007, reflecting continued US economic growth.
Distillate (diesel fuel and heating oil) consumption, which increased 1.3 percent in 2005, is projected to increase 1.8 percent in 2006 and 2.2 percent in 2007.