U.S. Energy Information Administration Independent Statistics & Analysis www.eia.gov

Effects of low oil prices

Energy & Environmental Markets Advisory Committee

Commodity Futures Trading Commission

February 26, 2015 | Washington, DC

By: Adam Sieminski

U.S. Energy Information Administration
Historical and projected oil prices

Effects of low oil prices 

February 26, 2015 2

Crude oil price

price per barrel (real 2010 dollars)

Sources: U.S. Energy Information Administration, Thomson Reuters

0

20

40

60

80

100

120

140

1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014

imported refiner acquisition cost of crude oil WTI crude oil price

Prices shown are quarterly averages: 

dashed lines are EIA projections
Key takeaways

Oil prices: EIA’s forecast for Brent averages $58/b in 2015 and $75/b in 2016. The 

market-implied 95% confidence band for Brent (estimated from WTI futures and options 

prices) is extremely wide – with a range from $35/b to $100/b across 2015-2016.

Demand: Non-OECD Asia accounts for more than 50% of forecast liquids consumption 

growth of roughly 1 million b/d both 2015 and 2016; lower demand growth is a major a 

downside risk to the price forecast 

U.S. oil production: Lower-48 oil production in 4Q2015 and 1Q2016 is only slightly 

above its 4Q2014 level; however, offshore production continues to grow steadily 

The economy and consumers: EIA’s energy forecast reflects a U.S. economic growth 

outlook for 2015-16 that is somewhat stronger than 2013-14 experience. 

• Relatively low oil prices and increased energy efficiency Energy expenditures as a 

share of GDP are forecast at 6.2% in 2015, their lowest level since 2002, reflecting 

both lower oil prices and energy efficiency. 

• Average U.S. household (20,800 miles of vehicle travel) projected gasoline spending 

is $750 less in 2015 than in 2014, and about $450 less in 2016 than in 2014. 

Effects of low oil prices 

February 26, 2015 3
Brent crude oil prices were relatively stable through the first half of 

2014; increased oil supply and lower global economic growth 

expectations lowered prices from July 2014 to January 2015

Effects of low oil prices 

February 26, 2015

dollars per barrel

Source: EIA, Bloomberg

4

40

50

60

70

80

90

100

110

120

Jan-2014 Apr-2014 Jul-2014 Oct-2014 Jan-2015

Brent front month futures...

Potential disruption in 

Russian oil/gas 

exports

Potential disruption in 

Iraq oil production

Lowered global economic growth 

expectations for 2014 and 2015

Increased U.S. production and 

uncertainty over OPEC future 

production quotas

November OPEC meeting 

resulted in no production quota 

changes

Lowered risk of oil 

supply outages in 

Iraq

Stable demand and 

supply outlooks

Higher, sustained 

Libyan oil production
Oil prices rise from mid-2015 through mid-2016 in EIA’s forecast –

however, the market-implied confidence band is very wide

Effects of low oil prices 

February 26, 2015 5

WTI price

dollars per barrel

Source: EIA, Short-Term Energy Outlook, February 2015

0

25

50

75

100

125

150

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct

Historical Spot Price

STEO Forecast

NYMEX Futures Price

2013 2014 2015 2016
EIA forecast oil price path is similar to trajectory of 2008-10 price 

recovery (just a comparison, not a factor in developing the forecast) 

Effects of low oil prices 

February 26, 2015 6

Brent crude oil price

dollars per barrel

Source: EIA, Short-Term Energy Outlook, February 2015

0

20

40

60

80

100

120

140

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct

2008-10

2014-16

Forecast

year 1 year 2 year 3
Global oil demand tracks world GDP growth

Effects of low oil prices 

February 26, 2015 7

annual percent change

Source: U.S. Energy Information Administration, International Energy Outlook 2014

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

World GDP growth

World oil demand growth
Global liquids consumption growth is forecast at 1.0 million 

bbl/d in both 2015 and 2016

Effects of low oil prices 

February 26, 2015

Forecast

-2

-1

0

1

2

3

4

5

6

7

8

76

78

80

82

84

86

88

90

92

94

96

2008 2009 2010 2011 2012 2013 2014 2015 2016

Change in U.S. consumption (right axis)

Change in China consumption (right axis)

Change in other consumption (right axis)

Total world consumption (left axis)

Source: EIA, Short-Term Energy Outlook, February 2015

World liquid fuels consumption 

million barrels per day

annual change

million barrels per day

8
North American oil production growth slows with lower oil prices 

but remains the main driver of global production growth

Effects of low oil prices 

February 26, 2015

-0.5

0.0

0.5

1.0

1.5

2.0

2014 2015 2016

OPEC countries North America Russia and Caspian Sea

Latin America North Sea Other Non-OPEC

Forecast

World crude oil and liquid fuels production growth

million barrels per day

Source: EIA, Short-Term Energy Outlook, February 2015

9
Lower oil prices are expected to provide an immediate boost to 

the economy

• Starting from a base price of roughly $100 per barrel, a $10 drop in oil 

prices sustained for four quarters is estimated to raise real GDP by about 

0.22% above baseline; if the drop in oil prices is sustained for a second 

year, the level of real GDP in that year averages 0.34% above baseline 

• Estimated GDP impacts presented above are roughly scalable for drops of 

$20 or $30 per barrel; in the latter case the average level of GDP in the 

second year would be roughly 1% above baseline.

• If oil prices drop and then return to previous levels, GDP begins to return as 

well; the speed in which GDP adjusts depends on the oil price trajectory

• Estimated percentage impacts of an oil price drop on consumer prices and 

unemployment are generally smaller than impacts on GDP, and also tend 

to decrease in the second year as increased demand puts pressure on 

prices of other goods

Effects of low oil prices 

February 26, 2015 10
household energy expenditures

dollars

Sources: 2013 expenditures and income from BLS Consumer Expenditure Survey. The average household in the 

BLS survey (called a consuming unit) averages 2.5 people and 1.3 income earners. Expenditures for 2014-16 based 

on average prices from EIA Short-Term Energy Outlook, February 2015

11

Average household energy expenditures fall by 17% in 2015, then 

rebound somewhat in 2016 (based on EIA price forecast)

$2,611 $2,514

$1,766 $2,054

$142 $140

$103

$114

$1,422 $1,464

$1,489

$1,515

$393 $416

$392

$403

0

1,000

2,000

3,000

4,000

5,000

2013 2014 2015 2016

Natural gas

Electricity

Fuel oil and other fuels

Transportation (gasoline

and motor oil)

$4,568 $4,534 $3,750 $4,086

Effects of low oil prices 

February 26, 2015
Various events could lead to changes in global supply or demand 

that could push future crude oil prices higher or lower than the 

STEO forecast

Effects of low oil prices 

February 26, 2015

Increase Prices

Decrease Prices

Event

Social unrest in Venezuela leads to supply disruptions

ISIL disrupts Iraqi exports

Iranian sanctions are tightened

Social unrest in oil-dependent countries leads to supply disruptions

OPEC cuts output more than projected

World economic growth is lower than projected (e.g., China)

Saudi Arabia keeps production at 9.6-9.7 million bbl/d in 2016

Reduction in unplanned production outages

Iranian sanctions are lifted

12
For more information

Effects of low oil prices 

February 26, 2015 13

U.S. Energy Information Administration home page | www.eia.gov

Annual Energy Outlook | www.eia.gov/aeo

Short-Term Energy Outlook | www.eia.gov/steo

International Energy Outlook | www.eia.gov/ieo

Monthly Energy Review | www.eia.gov/mer

Today in Energy | www.eia.gov/todayinenergy

State Energy Profiles | http://www.eia.gov/state

Drilling Productivity Report | http://www.eia.gov/petroleum/drilling/