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EIA Forecasts 1.7% Increase in US Oil Consumption in 2007

10 October 2006

Steooct
Forecast increase in petroleum consumption. Click to enlarge. Source: EIA.

In the current release of its Short Term Energy Outlook (STEO), the US Energy Information Administration projects an increase in US demand for oil of 1.7% in 2007 (350,000 barrels per day), to 20.96 million barrels per day.

That reflects a decrease from the prior STEO, in which the EIA forecast an increase in US oil consumption of 2.0% in 2007. The newest figures reflect a 1.13% increase in gasoline consumption to 9.33 million barrels per day due to a corresponding increase in total vehicle miles traveled.

The EIA expects petroleum demand in the US to end up flat for this year. For the first 6 months of 2006, average demand was down 130,000 bpd (0.6%) from the previous year due to mild weather—reducing demand for heating fuel—and rapidly rising motor gasoline and jet fuel prices. The second half of 2006, however, should see slightly growth in total petroleum demand of 30,000 bbl/d over the same period in 2005.

Surplus world crude oil production capacity, all of which is located in Saudi Arabia, is expected to increase only slightly in 2007 (World Oil Surplus Production Capacity). As a result, surplus world oil production capacity is projected to remain near 30-year lows.

—EIA STEO

The EIA projects that due to the limited surplus world crude oil production capacity and continued tight supply-demand balance, world oil prices in 2007, on average, will be only slightly less than their average 2006 levels. The WTI crude oil price averaged $63.80 per barrel in September.

EIA anticipates an increase in WTI prices to about $67 by January, boosted by winter heating fuel demand. Under the baseline weather scenario, the projected fourth-quarter average WTI price of about $63 per barrel is $3 per barrel above the year-ago level, but $9 per barrel lower than in the previous STEO.

Average retail regular gasoline prices experienced the second largest average monthly decline ever, falling by 40 cents per gallon from August to September. Only the record 46-cents-per-gallon drop coming off the hurricane season price spike in November 2005 was greater. The average pump price for the fourth quarter of 2006 is now expected to be $2.29 per gallon, down 54 cents per gallon from the third quarter. Regular gasoline prices are projected to average $2.58 in 2006 and $2.51 in 2007.

—EIA STEO

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October 10, 2006 in Fuel Efficiency, Oil | Permalink | Comments (17) | TrackBack (2)

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Comments

Dang! Just when one thought the economy could grow w/out an increase in fossil energy consumption, it increases.

The 8-9% of GDP spent on energy figure is higher than what I thought. That is inline with the mid-80's, but not as high as the early 80's. During that period, the 13%+ on energy compelled consumers to insulate their homes, and buy/drive more efficient cars. It also helped drop the US economy into a deep recession.

That, and Reagan's drive to kill inflation.

Which country are you talking about? Last time I checked, the major recessions were in the mid 1970's when the oil crisis hit and we left the gold standard and had massive stagflation for years, 1989-91 or so spurred by rising oil prices and major market correction, and 2000-2002 again as major market correction from the dot-com farce and September 11th fallout. The 80's were quite good, although I would hesitate to give too much credit to any one thing for it. Any free market economy will have boom and bust periods, usually separated by 10-12 years or so. It's not magic!

All the more reason why we will need to continue developing biodiesel, ethanol, and PEV/PHEVs.

Which country are you talking about? Last time I checked, the major recessions were in the mid 1970's when the oil crisis hit and we left the gold standard and had massive stagflation for years, 1989-91 or so spurred by rising oil prices and major market correction, and 2000-2002 again as major market correction from the dot-com farce and September 11th fallout. The 80's were quite good, although I would hesitate to give too much credit to any one thing for it.

The "recession" was only in 2001 (March-November) and didn't even fit the common technical definition of one (a minimum of two consecutive quarters of real GDP declines).

Ones that preceded that were 7/90-3/91, 7/81-11/82, 1/80-7/80, and 11/73-3/75.

http://www.nber.org/cycles/recessions.html
http://www.nber.org/cycles/cyclesmain.html

As for the 80s being "quite good", that is a myth. The BEA tracks GDP data back to 1929, and the 80s is only second to the 30s in terms of worst overall real GDP growth over a given decade.

Sid Hoffman,
Pizmo is right, the early 80's were not that rosy. Later on, the stock market and housing boom made it seem better than it really was, due in part to the fact of the lousy decade preceding it. Few remember it now, but the early Reagan 1 years were rough; Reagan 2 was better.

Pizmo is right, the early 80's were not that rosy. Later on, the stock market and housing boom made it seem better than it really was, due in part to the fact of the lousy decade preceding it. Few remember it now, but the early Reagan 1 years were rough; Reagan 2 was better.

The Feds also injected about $1.6 trillion of debt financed money into the economy during Reagan's two terms - a 180% increase over the amount he inherited. That'll stoke the fire.

The early Reagan recession was a very sharp and well defined economic event. It is often overlooked, but it indeed was caused by his (sucessful) attempts to bring inflation under control. Look it up.

The notion that a free market economy just naturally goes through 12 year boom and bust cycles is a major simplification of the modern economy, at best. The U.S. economy is hardly a "free" market in the classical sense of the term, as it has been heavily regulated and manipulated by government since at least the New Deal era. (That statement is not meant as a criticism, by the way.) Moreover, business conditions are sensitive to international events and dislocations, which hardly take place on a 12 year clockwork cycle.

I wonder whether it is not simply the decline in oil prices which is allowing consumption to rise again. Had prices remained high, the economy might have grown, but by stressing further efficiencies (i.e. continuing to buy cars instead of SUVs). Now that prices have come down a bit, the economy also grows, but people are re-adopting their old bad habits.

This forecast is like the Titanic after it has hit the iceberg and taking in seawater, now at a faster rate, and no one dared to interrupt the parties that were going on and the captain is still asleep. Eventually, the money for petroleum importation will run dry, and the economy will sink even faster than the Titanic after it broke in two pieces.

Roger:
Classical economical theories once again do not work. US/Canada block largely moved to Internet-based economy, which increases efficiency of production, distribution, but most important of all – delivers much bigger bang for buck spent by consumers. As a result, traditional consumer spending are lower (and this drives GDP per capita lower), but actually consumer gets better goods and services for less money, and have spare change to burn. Huge spending to improve housing conditions in recent years is one of examples of spending of such “extra change”.

The EIA is notorious for bad numbers. Take these numbers with the same scepticism.

Andrey,
What I meant was that the trade deficit is getting larger and larger partly because of increase in petroleum importation from borrowed money to finance our economy and the trade and budget deficit. Now, many foreign goods we can do without, but not petroleum the way gas guzzling vehicles are being bought and driven in the increasing urban sprawl. Look at what happened to Argentina 5 years ago when the sources of foreign credits ran dry and the economy went into a tailspin. There were a great deal of chaos and looting, and if you belongs to a successful ethnic minority, watch out for irrational persecution that will happen times after times. Look what happened to the ethnic Chinese in Indonesia when the economy there went sour in the 1980's. Of course, if one belongs to a disadvantaged minority group, one will still lose big time economically, often being the last to get hired and first to get laid-off.

Roger:
We are talking about US ECONOMY, which was power house of global economy and global technological advancement for about half a century. US earned a lot of credit for it. Nobody in the world consider US deficit and alike as anything more then minor factor in US dollar course. Everybody, I mean EVERYBODY, are buying and investing in US stuff. They do not know how, but quite confident that we will figure out how to increase our wealth year after year.

By the way, this year Canada become number one oil exporter to US, ahead of Saudi Arabia. You can count money US spending on Canadian oil as going to states like Michigan (Ontario), Washngton (BC), Alaska (Alberta), etc.

You can count money US spending on Canadian oil as going to states

I'm sure Canadians are pleased with your opinion.

Indeed, the money you spend on our (Canadian) oil winds up in the same place it would if we were American ... China. Andrey does have a point though, our economies are completely linked together that without the American obsession with Green money you wouldn't be able to tell where our economy stops and theirs begins.

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