What’s Up With Gasoline Prices? America’s Oil and Natural Gas Industry April 2017 For the latest report, please visit www.api.org/gasolineprices Table of Contents Gasoline, Diesel and Crude Oil Prices...............................................................Page 1 Oil Prices Relate to Many Uncertain Factors .....................................................Page 2 Global Oil Supply Disruptions vs. U.S. Oil Growth ............................................Page 3 World Liquid Fuel Consumption........................................................................Page 4 Growth in World Liquid Fuel Consumption .......................................................Page 5 OPEC Surplus Production Capacity .................................................................Page 6 The Value of the Dollar Makes a Difference .......................................................Page 7 Accumulating Risks to the Development of Oil and Natural Gas ......................Page 8 Strategic Petroleum Reserve ............................................................................Page 9 What Consumers Are Paying for at the Pump ..................................................Page 10 Gasoline Taxes by State ...................................................................................Page 11 Earnings Compared to Manufacturing ..............................................................Page 12 Who Owns the Oil Companies .........................................................................Page 13 EIA Price Forecast ............................................................................................Page 14 Fuel-Saving Tips for Drivers ..............................................................................Page 15 What’s Up With Gasoline Prices? | April 2017 Gasoline, Diesel and Crude Oil Prices Changes in gasoline and diesel prices mirror changes in crude oil prices. Gasoline, Diesel and Crude Oil Prices October 14, 2015 5 4 3 dollars 2 1 0 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Diesel (AAA) $2.53 Gasoline (AAA) $2.30 WTI Crude Oil (NYMEX) $1.11 Source: NYMEX (WTI crude oil) and AAA (gasoline and diesel) Changes in gasoline and diesel prices mirror changes in With the worldwide economic recovery underway, crude oil prices. Those changes are determined in the demand is on the rise again but unrest in the Middle global crude oil market by the worldwide demand for East and North Africa has put supplies at risk. This and supply of crude oil. Weak economic conditions in combination of rising demand and reduced supply the U.S. and around the world in 2008 and into 2009 led helped to push prices higher over the last few years. to less demand which helped push prices down. However, the recent downturn in prices was the result of the growth in oil supplies, largely from the U.S., out pacing the growth in global demand. What’s Up With Gasoline Prices? | April 2017 Page 1 Oil Prices Relate to Many Uncertain Factors A host of factors, many of them uncertain, affect the price of crude oil and the products made from it. Oil Prices Relate to Many Uncertain Factors Source: EIA. Crude oil prices are set globally through the daily In addition to economic growth and geopolitical risks, interactions of thousands of buyers and sellers in both other factors, including weather events, inventories, physical and futures markets, and reflect participants’ exchange rates, investments, spare capacity, OPEC knowledge and expectations of demand and supply. production decisions, and non-OPEC supply growth all figure into the price of crude oil. What’s Up With Gasoline Prices? | April 2017 Page 2 TitleGlobal Oil Supply Disruptions vs. U.S. Oil Growth Growth in U.S. oil production has largely offset the growth in global oil supply disruptionsCallout since 2011. GrowthGraphic Title in Global Oil Supply Disruptions Growth in U.S. Oil Production* 5 5 4 4 3 3 mmb/d mmb/d 2 2 1 1 0 0 2013 2014 2015 2013 2014 2015 Non-OPEC OPEC U.S. Crude Source: EIA. Source: EIA. *Includes hydrocarbon gas liquids, biofuels, and refinery processing gains. Source: Unplanned supply disruptions in the global crude oil U.S. production growth has made all the difference. It market have grown in recent years, peaking at 3.8 has largely offset the loss from unplanned production million barrels a day in May and September 2015. outages around the world and put downward pressure According to the EIA, this is the highest level of supply on prices to the benefit of all consumers. Text disruptions since the Iraq-Kuwait War (1990-91) when prices spiked to new highs.1 1. EIA, Today in Energy, August 27, 2014. What’s Up With Gasoline Prices? | April 2017 Page 3 World Liquid Fuel Consumption World oil consumption is expected to grow as the global economy rebounds. World Liquid Fuel Consumption 97.5 95 92.5 EIA Forecast 90 87.5 million barrels per day million barrels 85 82.5 80 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 World Liquid Fuel Consumption Source: EIA, Short-Term Energy Outlook, October 2015 The world’s demand for oil increased sharply for several nearly two million barrels per day less than at its peak years, peaking at 87 million barrels per day in 2007. before rebounding in 2010. The Energy Information However, the global economic slowdown in recent years Administration expects growth to continue over the next reversed this trend and demand fell for two consecutive couple of years reaching 93.8 million barrels per day in years to just 85 million barrels per day in 2009, or 2015 and 95.2 million in 2016. What’s Up With Gasoline Prices? | April 2017 Page 4 Growth in World Liquid Fuel Consumption Growth in world oil consumption is expected to be concentrated in non-OECD countries. Growth in World Liquid Fuel Consumption 0.75 0.5 0.25 million barrels per day million barrels 0 EIA Forecast -0.25 -0.5 2014 2015 2016 OECD Non-OECD FSU & Eastern Europe Other Source: EIA, Short-Term Energy Outlook, October 2015 The EIA projects consumption in the Organization for 2. The 34 member countries of the OECD include: Economic Cooperation and Development (OECD)2 Australia Hungary Poland Austria Iceland Portugal countries to increase slightly this year and next. Global Belgium Ireland Slovakia Canada Israel Slovenia growth is concentrated in the non-OECD countries Chile Italy Spain Czech Republic Japan Sweden including China and the Middle East with world gains Denmark Korea (South) Switzerland Estonia Luxemburg Turkey of 1.34 million barrels per day in 2015 and 1.41 million Finland Mexico United Kingdom barrels per day in 2016. France Netherlands United States Germany New Zealand Greece Norway What’s Up With Gasoline Prices? | April 2017 Page 5 OPEC Surplus Production Capacity Surplus crude oil capacity is expected to increase. OPEC Surplus Crude Oil Production Capacity 5 EIA Forecast 4 3 2004-2014 average (2.2 million barrels per day) million barrels per day million barrels 2 1 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 OPEC Surplus Crude Oil Production Capacity Source: EIA, Short-Term Energy Outlook, October 2015 The amount of surplus crude oil capacity, which is the EIA expects OPEC surplus production capacity will amount of oil available to meet surges in demand or average about 1.5 million barrels per day in 2015 and disruptions in supply, remained near 2 million barrels increase to 2.2 million barrels per day in 2016. per day over the last few years as demand for crude oil increased along with global economic growth, and supplies were put at risk by unrest in the Middle East and North Africa. What’s Up With Gasoline Prices? | April 2017 Page 6 The Value of the Dollar Makes a Difference Percent Change of West Texas Percent Change of West Texas Intermediate Crude (WTI) in Dollars Intermediate Crude (WTI) in Dollars and Yen and Euros Jan 2, 2014 – October 9, 2015 Jan 2, 2014 – October 9, 2015 25 25 WTI Yen -40.14% WTI Euro -37.24% 0 0 -25 -25 percent percent -50 -50 -75 -75 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 WTI $ -47.83% WTI Euro -37.24% WTI $ -47.83% WTI Yen -40.14% Source: Board of Governors of the Federal Reserve Bank, EIA, NYMEX. Source: Board of Governors of the Federal Reserve Bank, EIA, NYMEX. The strength of the U.S. dollar against other currencies As oil prices have fallen around the world, the price around the world has widened compared to the Yen and decline has been greater for countries that have a strong the Euro. For American consumers this means they are currency like the U.S., but less for those that don’t. experiencing a greater fall in crude oil prices than the citizens of Japan and Europe. What’s Up With Gasoline Prices? | April 2017 Page 7 Accumulating Risks to the Development of Oil and Natural Gas There are accumulating risks to the development of oil and natural gas. Accumulating Risks to the Development of Oil and Natural Gas Source: NPC. The National Petroleum Council (2008) examined a broad These risks include political instability in the Middle East range of global energy supply, demand and technology and North Africa, the resurgence of resource nationalism projections through 2030 and concluded that “the world in Latin America, civil unrest in Nigeria, piracy off the is not running out of energy resources, but there are African coast, transit vulnerability in the Caspian, energy accumulating risks to continuing expansion of oil and subsidies in Asia, extreme weather around the world, natural gas production from the conventional sources and restricted access to resources in the U.S. These relied upon historically.” risks create significant challenges to meeting projected energy demand. What’s Up With Gasoline Prices? | April 2017 Page 8 Strategic Petroleum Reserve The Strategic Petroleum Reserve: America’s insurance policy in case of an oil supply disruption. SPR Storage Sites The Strategic Petroleum Reserve (SPR), the world’s In addition to energy emergencies, crude oil has been largest supply of emergency crude oil, was designed to withdrawn from the reserve for a variety of reasons, protect the country from fuel shortages in the event of an including test sales, exchange arrangements with private emergency.