# Presentation: 255781

## Short-Term Energy and Summer Fuels Outlook

**Short-Term Energy ****and Summer Fuels Outlook**

**Guy Caruso****Administrator, **
**Energy Information Administration**
** *****2006 Summer Transportation Fuels Outlook Conference******April 11, 2006******Washington, DC***

## Several Key Factors Drive the Short-Term Fuels Forecast

- Rising world oil consumption;
- Low global surplus production capacity and tight crude oil supply relative to demand;
- Supply concerns in international oil markets (such as in Nigeria, Iraq, and Iran);
- The challenges of:
- Stricter sulfur standards under the Tier 2 Gasoline program;
- MTBE phase-out;
- A shift to ultra low sulfur diesel.
*All these factors contribute to higher prices for petroleum products, particularly in the coming months.** *

## World Oil Consumption Growth Slowed in 2005; Projected to Increase in 2006-2007

**Source:  EIA, Short-Term Energy Outlook, April 2006**

## Non-OPEC Supply Growth Projected to Reach 0.8 million bbl/d in 2006 and 1.5 million bbl/d in 2007

**Non-OPEC Supply Growth Projected to Reach 0.8 million bbl/d in 2006 and 1.5 million bbl/d in 2007**

- * ***Hurricane recovery**

-  **Hurricane damage**

**World Liquids Production 2006**

**Source:  EIA, Short-Term Energy Outlook, April 2006**

## Large Demand Growth and Low Non-OPEC Supply Growth Create Tight Market Conditions

- **Includes OPEC non-crude production*

**Demand growth exceeds**
** ****non-OPEC supply growth**

**Source:  EIA, Short-Term Energy Outlook, April 2006**

**Forecast**

## 2005 World Oil Spare Production Capacity Reached Lowest Level in 30 Years 

**Forecast**

**2005 World Oil Spare Production Capacity Reached Lowest Level in 30 Years**** **

**Source:  EIA, Short-Term Energy Outlook, April 2006**

## West Texas Intermediate Crude Oil Price Projected to Peak in mid-2006, then Gradually Decline.

**Source:  EIA, Short-Term Energy Outlook, April 2006**

## Several Factors Are Driving 2006 U.S. Summer (April – September) Outlook for Motor Fuels

- High crude oil costs (up 13 percent from 2005 - summer to summer);
- Increased gasoline demand growth (up 1.5 percent from 2005 – summer to summer);
- Adequate stocks but refining capacity constraints;
- Tighter constraints on sulfur content in gasoline and phase-out of MTBE;

**Several Factors Are Driving 2006 U.S. Summer (April – September) Outlook for Motor Fuels**

**Source:  EIA, Short-Term Energy Outlook, April 2006**

**Projected Increases in Personal Income and Miles Traveled Drive Up U.S. Gasoline Demand **

**Forecast**

**Percent**
**Change**

**Source:  EIA, Short-Term Energy Outlook, April 2006**

**Motor Gas **
**Demand**

## Motor Gasoline and Distillate Stocks Projected to Remain Within 5-year Min/Max Range

**Motor Gasoline and Distillate Stocks Projected to Remain Within 5-year Min/Max Range**

**Source:  EIA, Short-Term Energy Outlook, April 2006**

## Days of Supply of OECD* Commercial Oil Stocks Decline Gradually Through 2007

**Days of Supply of OECD* Commercial Oil Stocks Decline Gradually Through 2007**

- * Organization for Economic Cooperation and Development

**Source:  EIA, Short-Term Energy Outlook, April 2006**

## U.S. Motor Gasoline Market Faces New Challenges This Year

- Final stage of the phase-in of EPA’s Tier 2 gasoline program, which began in 2004:
- Not expected to create significant problems for domestic refining and distribution;
- May constrain foreign suppliers’ ability to respond to unexpected local supply disruptions or demand shocks.
- Phase-out of methyl tertiary butyl ether (MTBE) as a motor gasoline blendstock:
- Projected to slightly increase average price of all gasoline due to lost production capability, fewer import sources, and tight ethanol markets;
- Raises potential for localized price spikes arising from a complex transition in a tight market over a fairly short time period.

**Source:  EIA, Short-Term Energy Outlook, April 2006**

## Current and Projected Ethanol Production Will Replace MTBE 

**Ethanol**

**MTBE**

**Current and Projected Ethanol Production Will Replace MTBE**** **

**Million**
**barrels**
**per day**

**Source:  EIA, Short-Term Energy Outlook, April 2006**

## Gasoline and Blending Components Imports Projected to Average 9.9% of Summer Demand 

**Million barrels per day**

**Gasoline and Blending Components Imports Projected to Average 9.9% of Summer Demand**** **

**Source:  EIA, Short-Term Energy Outlook, April 2006**

**Notes:**
Net  imports of gasoline and blending components are projected to average 925,000 barrels per day, or 9.9 percent of motor gasoline demand during the April-September period.   This is a 4.6-percent decrease from the 972,000 barrels per day of last summer.  
The expected reduction is due to larger than typical imports in 2005 to replace lost supply from the hurricanes, and the increased price of imports resulting from the Tier 2 low sulfur gasoline requirements and the move to ethanol-blended RFG from MTBE blended RFG.   (The base gasoline blending material for ethanol-blended RFG is more difficult to produce in the summer months than MTBE-blended RFG.)  
Gasoline imports into the United States are primarily destined for the East Coast (about 88 percent of the U.S. total based on 2005 data).  Approximately 25 percent of East Coast gasoline demand is met by net imports of finished product and blending components.  
Since 1995, blending components have become a substantial fraction of imported volumes.   The chart shows that imports of blending components now generally exceed those of finished motor gasoline.

**Refinery Utilization Rates Projected to Average About 94%, up from 92% Last Summer**

**Forecast**

- Utilization Rate = Distillation inputs / atmospheric distillation **operable** capacity

**Source:  EIA, Short-Term Energy Outlook, April 2006**

## Summer Retail Gasoline Prices* Projected to Average $2.62 per Gallon, 25 cents More than Last Summer

**Summer Retail Gasoline Prices* P****rojected to Average $2.62 per Gallon, 25 cents More than Last Summer**

- * Regular gasoline, average all formulations.
- ** Retail price minus crude oil cost minus taxes, per gallon

**Source:  EIA, Short-Term Energy Outlook, April 2006**

**Regular Gasoline Summer Prices Vary by Region**

**U.S. Average = $2.37**

**U.S. Average = $2.62**

**Source:  EIA, Short-Term Energy Outlook, April 2006**

- Summer = April through September average

## Summer Retail Diesel Prices Projected to Average $2.62 per gallon, up 21 cents from Last Summer 

**Summer Retail Diesel Prices Projected to Average $2.62 per gallon, up 21 cents from Last Summer**

**Source:  EIA, Short-Term Energy Outlook, April 2006**

- ** Retail price minus crude oil cost minus taxes, per gallon

## Summary

- Crude prices (WTI) are expected to remain above $60 per-barrel for the rest of 2006 and 2007;
- In the United States, additional changes in gasoline specifications and tight refinery capacity can be expected to increase operating costs slightly and limit supply flexibility.
- Gasoline prices are expected to average $2.62 over this summer;
- Diesel prices also are expected to average $2.62 this summer.

**Summary**

**Source:  EIA, Short-Term Energy Outlook, April 2006**

## Extra Slides

**Forecast**

**Dollars per Gallon ($2005)**

**Inflation-Adjusted Summer Gasoline Margins **
**Continue to Rise**

**Source:  EIA, Short-Term Energy Outlook, April 2006**

## Summer Motor Gasoline Supply/Consumption Growth Balance (Change from Year Ago)

**Summer Motor Gasoline Supply/Consumption Growth Balance (Change from Year Ago)**

**Forecast**

**Million barrels per day**

- Note: Net imports and stock draw include blending components

**Source:  EIA, Short-Term Energy Outlook, April 2006**

**Total Motor Gasoline Stocks by PADD (March 31)**

**Million barrels**

**Source:  EIA, Short-Term Energy Outlook, April 2006**

## Natural Gas Spot Prices Projected to Dip During Spring and Summer ‘06, but Remain Relatively High 

**Source:  EIA, Short-Term Energy Outlook, April 2006**

## Working Natural Gas in Storage: Currently about 60 percent above 5-year average; more than 30 percent above year ago

**Working Natural Gas in Storage: Currently about 60 percent above 5-year average; more than 30 percent above year ago**

**Source:  EIA, Short-Term Energy Outlook, April 2006**

**Percent difference from 5-year average**