U.S. Crude Oil and Liquid Fuels

U.S. Liquid Fuels Consumption

Total liquid fuels consumption fell 230 thousand bbl/d (1.2 percent) in 2011. Motor gasoline consumption accounted for the bulk of the decline, shrinking 240 thousand bbl/d (2.7 percent). In 2012, total consumption decreases an additional 280 thousand bbl/d (1.5 percent). The year-over-year decline in total consumption narrowed from 660 thousand bbl/d in the first quarter of 2012 to 140 thousand bbl/d in the second quarter. EIA expects some in total liquid fuels consumption in 2013, with a projected year-over-year increase of 80 thousand bbl/d (0.5 percent). Most of the recovery comes from distillate fuel oil and natural gas liquids consumption, which rise because of continued growth in freight shipments and industrial use and because of the assumption of near-normal weather this coming winter.

Despite higher assumed growth in U.S. real disposable income and projected declines in retail pump prices of almost 6 percent in 2013, forecast motor gasoline consumption is flat because of slow growth in the driving-age population, improvements in the average fuel economy of new vehicles, and increased rates of retirement of older, less-fuel-efficient vehicles.

U.S. Liquid Fuels Supply and Imports

Domestic crude oil production increased by an estimated 180 thousand bbl/d (3.3 percent) to 5.66 million bbl/d in 2011. Forecast crude oil production increases to 6.34 million bbl/d in 2012. Forecast lower-48 crude oil production grows by a robust 740 thousand bbl/d in 2012, primarily from the Bakken, Permian basin, and Eagle Ford producing areas. In 2013, total crude oil output rises a further 490 thousand bbl/d, most of which is accounted for by increases in lower-48 production. The number of onshore oil-directed drilling rigs reported by Baker Hughes has increased from 777 at the beginning of 2011 to 1,191 at the start of 2012, and to 1,409 as of September 7, 2012.

Significant events have occurred since last month's Outlook. There have been fires at Chevron's Richmond, California refinery (This Week In Petroleum, An Update on West Coast Gasoline Markets, August 22, 2012) and PDVSA's Amuay refinery in Venezuela. The Richmond fire contributed to gasoline price increases in California, while the fire at the Amuay refinery caused a short-term increase in the price of gasoline and diesel fuel in the eastern United States. Hurricane Isaac led to a peak shut-in of 1.3 million bbl/d of U.S. crude oil production (a total of 13.0 million barrels from August 25 through September 10) in the Gulf of Mexico and curtailed Gulf Coast refinery runs with a decline in crude oil inputs of 0.7 million bbl/d for the week ending August 31.

The share of total U.S. consumption met by total liquid fuel net imports of both crude oil and products has been falling since peaking at over 60 percent in 2005. In 2011, it averaged 45 percent, down from 49 percent in 2010. EIA expects that the total net import share of consumption will continue to decline to 41 percent in 2012 and to 39 percent in 2013 because of the substantial increases in domestic crude oil production. If the 2013 forecast holds true, it would be the first time the share of total U.S. consumption met by total liquid fuel imports is less than 40 percent since 1991.

U.S. Petroleum Product Prices

After a sharp increase in retail gasoline prices earlier this year, the monthly average price for regular grade gasoline reached $3.90 per gallon in April. Prices then fell for three consecutive months, averaging $3.44 per gallon in July. Rising crude prices contributed to an increase in regular gasoline retail prices to $3.84 per gallon on September 3. EIA expects retail gasoline prices to begin declining later this month as the gasoline market recovers and transitions from summer-grade to winter-grade gasoline specifications. Projected regular gasoline retail prices average $3.58 per gallon during the fourth quarter of 2012, up from the $3.30 per gallon projected in last month's Outlook. Projected regular gasoline retail prices average $3.64 per gallon in 2012 and $3.43 per gallon in 2013, both about 11 cents per gallon higher than in last month's Outlook. EIA expects that on-highway diesel fuel retail prices, which averaged $3.84 per gallon in 2011, will average $3.96 per gallon and $3.73 per gallon in 2012 and 2013, respectively.