U.S. Product Demand Will Remain Below 200 Levels But Crude Production Will Rebound

In its recently released Annual Energy Outlook 2017, the EIA outlines U.S. petroleum demand and production  prospects through 2040.

To deal with the always tricky business of oil and gas forecasting, EIA takes a scenario analysis approach, examining outcomes under six potential scenarios. These include a Reference case, a High Economic Growth case, High and Low Price cases, and High and Low Oil and Gas Resource and Technology cases.

U.S. Production Between 10 and 11 MMBOPD in the Reference Case

Reference crude oil production levels are expected to level off between 10 and 11 million BPD, as tight oil development moves into less productive areas and well productivity decreases. Lower 48 onshore tight oil development will continue to drive U.S. production, accounting for 60% of cumulative domestic production in the Reference case.

U.S. Petroleum Production and Exports Will Rise through 2040: EIA

In the High Oil and Gas Resource and Technology scenario, higher productivity will reduce development and production costs, allowing more development than in the Reference case. This scenario assumes higher initial EURs per well, larger onshore oil and gas resources, and higher long-term technology improvement.

Southwest and Rocky Mountains Lead U.S. Production Growth

Lower 48 onshore crude production will mainly occur in the Southwest, Dakotas, Rockies, and the Gulf Coast.  Permian tight and non-tight formations will lead Southwestern growth and tight oil from the Bakken formation will lead Dakota and Rocky Mountain growth. Gulf Coast production will also increase through 2040, led by growth in the Eagle Ford and Austin Chalk plays.

U.S. Petroleum Production and Exports Will Rise through 2040: EIAA scenario of low oil prices would decrease crude production due to poor economic incentives to drill in expensive formations and offshore. The flipside of lower prices of course is higher product demand and higher imports.

A high price scenario would cause the opposite situation, with higher crude production resulting in lower product demand and imports. In the High Oil and Gas Resource and Technology case, U.S. crude and petroleum liquids exports are higher than the Reference case.

The Consumption Trade-Off: Domestic Use or Exports?

In the Reference Case, the U.S. is expected to continue being a net importer of crude oil and petroleum products, although imports’ percentage of total consumption will fall. U.S. gasoline consumption and exports will remain sensitive to prices and higher efficiencies are expected to lead to declining petroleum consumption in all cases.

U.S. Petroleum Production and Exports Will Rise through 2040: EIA

In the Reference and High Price cases, improving fuel efficiency is expected to cause U.S. motor gasoline consumption to fall, while higher refinery output levels are expected to result in continued growth in product exports.

Export levels of U.S. refined products show a positive relationship with price and production, due to the competitive advantages possessed by U.S. refiners. Domestic gasoline consumption shows an inverse relationship, decreasing under higher prices.

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