By Brian Milne, Energy Editor for Schneider Electric.
The Energy Information Administration tweaked its latest forecast for retail gasoline prices in the U.S., adjusting lower its projection for the 2014 national average on expectations U.S. refiners would encounter reduced acquisition costs for crude oil this year.
In its latest Short-term Energy Outlook, released Feb. 11, the EIA shaved 2cts off its previously projected 2014 U.S. gasoline average for regular grade gasoline, all formulations, for this year to $3.44 gallon. That puts the 2014 average down 7cts from 2013, while the EIA expects the average to leak lower by another 7cts to $3.37 gallon for 2015. If realized, 2015 would be the third consecutive year in which the national gasoline average declined, with the average decreasing 12cts from 2012 when it peaked at $3.63 gallon to $3.51 gallon in 2013.
This new trend is driven by climbing U.S. oil production unearthed by drilling technology known as fracturing that combined with horizontal drilling has helped to push domestic crude output to a 26-year high above 8 million bpd. Vehicle efficiency gains joined by structural and behavioral changes by the U.S. populous have also reduced demand for gasoline, with an older population highlighted by aging Baby Boomers driving less while the younger generation known as Millennials have less interest in driving then previous generations. Data on Vehicle Miles Traveled shows this latter group, those born between 1980 and 2000, have driven less than young drivers in the past, reducing gasoline demand.
Prior to 2013, the annual U.S. average declined only two times in more than 20 years, most recently from 2008 to 2009, when the national price point dropped from $3.25 gallon to $2.35 amid the Great Recession. Prior, the average dipped from 2000 to 2001, sliding 6cts to a $1.42 gallon.
U.S. gasoline demand did increase in 2013 shows EIA, up 100,000 bpd or 1.1% from 2012’s 8.682 million bpd, which was the lowest annual demand rate since 2002. It was the first annual increase in US demand for the motor transportation fuel since 2012, and the largest year-on-year advance since 2004.
U.S. gasoline demand peaked in 2007 at 9.286 million bpd, the last year it averaged above 9 million bpd, having done so for four years starting in 2004.
Higher gasoline demand in 2013 was due to stronger-than-expected driving demand in the second half of the year, with highway travel seen slowing this year. Combined with ongoing vehicle efficiency gains, EIA projects gasoline demand to remain flat in 2014.
About the author
Brian L. Milne is the Energy Editor for Schneider Electric—a global specialist in energy management. Milne has been focused on the energy industry for 18 years as an analyst, journalist and editor. He can be reached at [email protected].