Factors Affecting Oil and Product Prices Rayola Dougher API Senior Economic Advisor
The price of oil has fluctuated sharply before Inflation-adjusted 2014 $/barrel 160 140 120 100 Iran/Iraq war PDVSA strike Iraq War Asian Growth Low spare capacity Libyan Uprising 80 60 40 20 Gulf War OPEC cuts 4.2 million 9/11 Recession Supply surplus 0 Sources: Inflation-adjusted average refiners acquisition price for crude oil
Changes in gasoline and diesel prices closely track changes in crude oil prices Average prices as of March 6, 2015 $5.00 Crude Oil $1.18 Gasoline $2.46 Diesel $2.93 $4.00 $3.00 $2.00 $1.00 $0.00 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Sources: NYMEX (WTI crude oil) and AAA (gasoline and diesel)
Many factors affect the price of oil, but in the end it comes down to supply and demand Source: EIA
Jan 2012 Jul 2012 Jan 2013 Jul 2013 Jan 2014 Jul 2014 Jan 2015 Jan-2012 Jul-2012 Jan-2013 Jul-2013 Jan-2014 Jul-2014 Jan-2015 Growth in U.S. oil production has largely offset the growth in global oil supply disruptions Growth in Global Oil Supply Disruptions (mmb/d) Growth in U.S. Crude Oil Production* (mmb/d) 4.0 3.5 3.0 2.5 2.0 1.5 Non- OPEC 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 OPEC 1.0 0.5 0.0 Source: EIA * Includes hydrocarbon gas liquids, biofuels, and refinery processing gains.
(million barrels per day) World growth in crude oil production surged ahead of growth in consumption in 2014 2.5 2 1.5 1 Production Consumption 0.5 0 2014 2015 2016 Source: EIA, Short-term Energy Outlook, February 2015
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 U.S. oil production is increasing as a result of technological innovations 10 9 U.S. Crude Oil Production (millions of barrels per day) 8 7 >73% growth 2008 to 2014 6 5 4 Source: EIA
SHALE ENERGY PROVIDES A NATIONAL OPPORTUNITY Shale Resources, Lower 48 States Current Shale Resources Prospective Shale Resources Basins Stacked Resources Shallowest/ Youngest Mid-Depth/ Mid-Age Deepest/Oldest Current and prospective resources and basins in the continental US Source: EIA based on data from various published studies updated May 9, 2011
Million barrels per day World crude oil and liquid fuels production growth 2 1.5 1 0.5 0-0.5 2014 2015 2016 OPEC North America Russia and Caspaian Sea North Sea Latin America Other Non-OPEC Source: EIA, Short-term Energy Outlook, February 2015
United States Canada Brazil China Oman Australia Malaysia India Norway Sudan/S. Sudan Other North Sea Kazakhstan Vietnam Gabon Colombia Russia Syria Egypt Azerbaijan Mexico United Kingdom (million barrels per day) Non-OPEC crude oil and liquid fuels production growth 4 3 2 1 0 2016 2015 2014-1 Source: EIA, Short-term Energy Outlook, February 2015
Crude oil and petroleum product imports have declined as a share of consumption 70% 60% 50% 40% 30% 20% 10% 0% Source: EIA
Why does diesel fuel cost what it does? 57% 18% 13% 12% Crude Oil Transportation and Retailing Excise Taxes Refining Source: EIA, based on average 2014 price of $3.83 per gallon
One reason the price of diesel fuel varies by state is that taxes vary Combined local, state and federal (cents per gallon) as of January 1,2015
EIA price forecast WTI Crude a ($/barrel) Brent Crude ($/barrel) Gasoline b ($/gallon) Diesel c ($/gallon) Heating Oil ($/gallon) Natural Gas d ($/mcf) Electricity (cents/kwh) 2013 2014 2015 Projected 2016 Projected 97.91 93.26 55.02 71.00 108.64 99.02 57.56 75.00 3.51 3.36 2.33 2.73 3.92 3.83 2.83 3.24 3.78 3.73 2.74 3.03 10.30 10.91 10.28 10.56 12.12 12.49 12.63 12.85 a West Texas Intermediate b Average regular pump price c On-highway retail d Residential average Source: EIA, Short-term Energy Outlook, February 2015.
Power and Politics
Expanding alternative fuels for transportation: current laws
The Congressional Budget Office predicts the price of diesel could rise by up to 51 cents per gallon and gasoline by up to 26 cents per gallon by 2017.
Why export crude oil? Crude oil exports yield economic benefit across all 50 states Save consumers up to $5.8 billion a year in lower fuel costs Add 300,000 jobs to U.S. economy in 2020 Reduce America s trade deficit by $22 billion in 2020 Source: ICF International and EnSys Energy,
87% of federal offshore acreage is off-limits to development
Development of Canadian oil sands would benefit the U.S. economy
Filling America s tank Within 10 years Canada and U.S. can provide all our liquid fuel needs Sources of liquid fuel supply in 10 years 24% 10% 13% 53% Oil from Rest of World Biofuels Oil from Canada U.S. Oil Production 10% 18% 72% EIA Forecast Sources: EIA; Wood Mackenzie Potential
Source: Wood Mackenzie, U.S. Supply Forecasts and Potential Jobs and Economic Impacts, September 7, 2011.
Voters voice strong support for increased domestic oil and natural gas development 90% Harris Poll Results on Increased U.S. Oil and Natural Gas Development 86% 86% 85% 83% 72% 70% 65% Lead to more jobs Help strengthen energy security Help stimulate economy Help lower energy costs Support O&NG development Support Keystone XL pipeline Support offshore development Increasing energy taxes may hurt consumers Source: Harris Interactive telephone poll, November 5, 2014
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