As we focus on the last six weeks of 2015 and the beginning of the Holiday Season here in the U.S., it’s a good time to look at current prices at the gasoline pump. One thing that I’ve noticed locally here in Arizona is that more retail gas stations are selling regular gasoline at less than $2.00 per gallon.
The following gasoline price updates are provided as the U.S. national average by GasBuddy.com:
One Week Ago 2.221
One Month Ago 2.302
One Year Ago 2.908
For motorists, this steady decline in gasoline prices adds up to transportation cost savings that can be transferred to spending elsewhere in the U.S. economy as we all prep for the upcoming Thanksgiving holiday. Add to the above, NASDAQ’s closing quote of $40.74 for a barrel of West Texas Intermediate (WTI) on Friday, November 13, 2015, [Ref 1] and the expectation is that the national average for a gallon of gasoline will move below $2 per gallon by year end if not before.
Fuel analysts at GasBuddy.com report that just four states saw gasoline prices rise overnight: Alaska (+2.4c), Maine (+0.4c), Vermont (+0.2c) and New York (+0.1c). By next week, it’s likely 99% of gas stations will be lower than they are today. This sets the stage for gasoline prices that drop to their lowest Thanksgiving Day price since 2004, when they averaged $1.93/gallon.
Once again, this appears to be good news for U.S. motorists, but not so much for those involved in shale oil production. With crude and gasoline prices expecting to move lower, the production of shale crude and condensate is expected to decrease, or at best remain flat. A chart was prepared by PIRA (Petroleum Industry Research Associates) Energy Group that shows the projected production of shale crude and condensate as a function of the going price for a barrel of oil.
Analysts at Oil Pro suggest that at current oil prices, a pretty steep correction in US shale oil production – about a 25% decrease over the next three years – is expected. What really stands out on this chart is that at an average $55 oil price, US shale oil production does not materially decline through 2020. And at an average $65 oil price, it would grow meaningfully.
It’s too early to read the tea leaves for how the numbers for shale oil or the price of a barrel of WTI will move within the next 36 months, however, the Energy Information Administration (EIA) estimates that total U.S. crude oil production declined by 40,000 barrels per day (b/d) in October compared with September. Crude oil production is forecast to decrease through the third quarter of 2016 before growth resumes late in 2016. Projected U.S. crude oil production averages 9.3 million b/d in 2015 and 8.8 million b/d in 2016.
With that, happy motoring and safe driving for the upcoming Thanksgiving holiday and weekend.
- NASDAQ Crude Oil (NYMEX) Price, Friday, November 13, 2015, http://www.nasdaq.com/markets/crude-oil.aspx?timeframe=7d
- Chart Of The Day: US Shale Oil Forecast Sensitivity To Oil Price, Source: Oil Pro; November 11, 2015, http://oilpro.com/image/7788/chart-day-us-shale-oil-forecast-sensitivity-to-oil-price?utm_source=DailyNewsletter&utm_medium=email&utm_campaign=newsletter&utm_term=2015-11-11&utm_content=Article_5_txt