Factors Affecting Oil and Product Prices Rayola Dougher API Senior - PowerPoint PPT Presentation

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 Low spare capacity 140 Libyan Uprising 120 PDVSA strike Iran/Iraq war Iraq War 100 Asian Growth 80 Gulf War OPEC cuts 4.2 60 million 40 Supply Recession surplus 20 9/11 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 Crude Oil $1.18 Gasoline $2.46 Diesel $2.93 $5.00 $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

Growth in U.S. oil production has largely offset the growth in global oil supply disruptions Growth in Global Oil Supply Growth in U.S. Crude Oil Disruptions (mmb/d) Production* (mmb/d) 4.0 4.0 3.5 3.5 3.0 3.0 2.5 2.5 2.0 2.0 Non- OPEC 1.5 1.5 1.0 OPEC 1.0 0.5 0.5 0.0 0.0 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 * Includes hydrocarbon gas liquids, biofuels, and refinery Source: EIA processing gains.

World growth in crude oil production surged ahead of growth in consumption in 2014 2.5 2 (million barrels per day) 1.5 Production Consumption 1 0.5 0 2014 2015 2016 Source: EIA, Short-term Energy Outlook, February 2015

U.S. oil production is increasing as a result of technological innovations U.S. Crude Oil Production (millions of barrels per day) 10 9 >73% growth 8 2008 to 2014 7 6 5 4 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: EIA

S HALE E NERGY P ROVIDES A N ATIONAL O PPORTUNITY 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

World crude oil and liquid fuels production growth 2 1.5 Million barrels per day 1 0.5 0 -0.5 2014 2015 2016 OPEC North America Russia and Caspaian Sea Latin America North Sea Other Non-OPEC Source: EIA, Short-term Energy Outlook, February 2015

(million barrels per day) growth Non-OPEC crude oil and liquid fuels production Source: EIA, Short-term Energy Outlook, February 2015 -1 0 1 2 3 4 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 2014 2015 2016

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% 12% 13% Excise Crude Oil Transportation Refining Taxes and Retailing 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 2015 2016 2013 2014 Projected Projected WTI Crude a 97.91 93.26 55.02 71.00 ($/barrel) Brent Crude 108.64 99.02 57.56 75.00 ($/barrel) Gasoline b 3.51 3.36 2.33 2.73 ($/gallon) Diesel c 3.92 3.83 2.83 3.24 ($/gallon) Heating Oil 3.78 3.73 2.74 3.03 ($/gallon) Natural Gas d 10.30 10.91 10.28 10.56 ($/mcf) Electricity 12.12 12.49 12.63 12.85 (cents/kwh) 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 Oil from Rest of World 10% 24% 18% Biofuels 10% 13% Oil from Canada 72% 53% U.S. Oil Production EIA Forecast Potential Sources: EIA; Wood Mackenzie

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 Harris is Poll ll Result sults s on Inc Increased sed U.S .S. . Oil il and N Natural l Gas s De Developm lopment 90% 86% 86% 85% 83% 72% 70% 65% Lead to more Help Help Help lower Support Support Support Increasing jobs strengthen stimulate energy costs O&NG Keystone XL offshore energy taxes energy economy development pipeline development may hurt security consumers Source: Harris Interactive telephone poll, November 5, 2014

For more information visit: www.api.org www.energytomorrow.org www.energycitizens.org