|Short-Term Energy Outlook
September 12, 2017
Significant disruptions in the U.S. energy market have occurred in recent weeks as a result of Hurricane Harvey. At the time of publication, continuing uncertainty exists regarding the timeline for the return to normal operations for a broad range of upstream production, refining, pipeline, and terminal and distribution infrastructure. The severity and duration of these outages create additional uncertainty about the path of energy prices in the coming weeks and months. Although this short-term energy outlook attempts to incorporate a baseline scenario for energy production, flows, and prices, actual outcomes could deviate significantly from this forecast. This month’s forecast does not include any projected effects from Hurricane Irma. At the time of publication, it was too early to have meaningful information on the extent to which Hurricane Irma will cause disruptions to the U.S. energy system.
U.S. crude oil production is estimated to have averaged 9.2 million barrels per day in August, down about 40,000 barrels per day from the July average. Crude oil production in the Gulf of Mexico fell to a monthly average of 1.6 million barrels per day in August, down by 70,000 barrels per day from the July level. At the time of publication, many oil production platforms in the Gulf of Mexico had returned to operation. The Energy Information Administration forecasts total U.S. crude oil production to average 9.3 million barrels per day for all of 2017 and 9.8 million barrels per day in 2018, which would mark the highest annual average production in U.S. history, surpassing the previous record of 9.6 million barrels per day set in 1970.
North Sea Brent crude oil spot prices averaged $52 per barrel in August, $4 per barrel higher than July.
The North Sea Brent crude oil spot price is forecast to average $51 per barrel in 2017 and $52 per barrel in 2018. The West Texas Intermediate crude oil spot price is expected to average $2 less per barrel than Brent prices in both 2017 and 2018.
Gasoline and Diesel Prices
U.S. regular gasoline retail prices reached $2.69 per gallon on September 11, 2017, up 29 cents per gallon from August 28 and the highest weekly average since August 2015. EIA forecasts the average U.S. regular gasoline retail price to be $2.61 per gallon in September and then fall to $2.40 per gallon in October, which are 25 cents per gallon and 10 cents per gallon higher, respectively, than projected in August. EIA forecasts the regular gasoline retail price to fall to $2.23 per gallon in December.
The Energy Information Administration expects on-highway diesel fuel retail prices, which has averaged $2.61 per gallon so far in 2017, will average $2.72 per gallon in 2018.
The peak price of $4.10 per gallon for gasoline in Nebraska was reached on July 15, 2008.
The peak price of $4.77 per gallon for diesel in Nebraska was reached on July 17, 2008.
Because taxes and retail distribution costs are generally stable, movements in gasoline and diesel prices are driven primarily by changes in crude oil prices and wholesale margins. Crude oil prices that differ from the forecast would be reflected in the price of motor fuels. Each dollar per barrel of sustained change in crude oil prices relative to the forecast translates into approximately a 2.4 cent-per-gallon change in product prices.