WASHINGTON – This year will see a national retail average for regular gasoline under $2, making it the lowest annual average price since 2004.
That’s according to the Energy Information Administration (EIA), which in its latest Short-Term Energy Outlook (STEO) forecasts a U.S. retail average of $1.98 per gallon for 2016, and $2.21 per gallon for 2017. After falling oil prices pushed prices down nearly a dime to an average of $1.95 per gallon in January, EIA expects gasoline prices to fall again to an average of $1.82 in February. It projects a first-quarter 2016 average of $1.88 per gallon, with an increase likely in the spring.
EIA has lowered its projection for diesel prices. After averaging $2.71 per gallon for 2015, the latest STEO expects diesel to average $2.22 per gallon in 2016, which is 7 cents per gallon (CPG) lower than last month’s STEO projection. The diesel average is expected to rise to $2.58 per gallon for 2017.
Weighing down the gasoline and diesel averages: a bearish outlook for oil prices. EIA expects North Sea Brent to average $38 per barrel for 2016 and rise to $50 per barrel in 2017. The agency expects the West Texas Intermediate (WTI) averages for 2016 and 2017 to match the Brent averages. However, current futures and options contracts are figuring “high uncertainty” into this price outlook, EIA cautioned, pointing out that the market expects WTI to range from $21 to $58 per barrel.
Growing global supply has continued to pressure oil prices since the middle of 2014. Global inventories grew approximately 1.8 million barrels per day (b/d) in 2015, and EIA forecasts them to increase 1.4 million b/d in first-quarter 2016. The biggest increase will happen in first-half 2016, EIA says, which will keep Brent under $40 per barrel through August.
In its latest STEO, EIA says daily changes in oil prices and global equity indexes were highly correlated, which probably “reflect increased uncertainty about future global economic growth.”
EIA expects petroleum and other liquid fuels production in countries not part of the Organization of the Petroleum Exporting Countries (OPEC) to fall by 0.6 million b/d in 2016, after a 1.4 million-b/d increase in 2015. This would mark the first production decline since 2008, and most of it will likely happen in the United States. For 2017, EIA forecasts non-OPEC production to fall by 0.2 million b/d.
Total U.S. liquid fuels production is forecast to fall by 0.5 million b/d in 2016, while staying “relatively flat” for 2017.
EIA expects OPEC oil production to grow by 0.7 million b/d for 2016 and increase 0.6 million b/d in 2017 as Iran adds to global supply. With this forecast, the agency is assuming that OPEC members will not agree to a production cut, but instead continue to try to protect their market share.
The latest STEO projects global consumption of petroleum and other liquid fuels to grow by 1.2 million b/d in 2016, with a 1.5 million-b/d increase in 2017.
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