U.S. diesel and gasoline prices continued to drop this week, according to data tracked by the Energy Information Administration (EIA), mirroring a decline in global oil prices the agency expects will continue thru 2017.
Diesel declined to an average of $2.112 per gallon this week in the U.S., EIA said, down 6.5 cents from last week and 82.1 cents per gallon cheaper compared to the same week in 2015.
The Gulf Coast and Midwest were home to the cheapest diesel in the U.S. this week, at $2.014 and $2.023 per gallon, respectively, while prices declined the most in the Midwest and California, with both registering a dip of 7.3 cents per gallon.
Gasoline dropped 8.2 cents this week to an average of $1.914 per gallon in the U.S., the agency noted, which is 15.2 cents per gallon cheaper compared to the same week in 2015.
Only out in the West Coast do gasoline prices remain above the $2 per gallon mark, EIA’s numbers indicated, at $2.523 per gallon with California’s prices included and $2.198 per gallon with California’s prices removed from the mix.
U.S. fuel prices may remain depressed for some time if the EIA’s latest
Short-Term Energy Outlook (STEO) holds true, as the agency now projects that Brent crude oil prices will average $40 per barrel in 2016 and $50 per barrel in 2017, with West Texas Intermediate (WTI) crude oil prices expected to be $2 per barrel lower than Brent in 2016 and $3 per barrel cheaper in 2017.
Crude oil prices are expected to remain low as supply continues to outpace demand in 2016 and more crude oil is placed into storage, EIA added, as global oil inventories increased by 1.9 million barrels per day (b/d) in 2015, marking the second consecutive year of inventory builds.
Inventories are forecast to rise by an additional 0.7 million b/d in 2016, before the global oil market becomes relatively balanced in 2017, the agency pointed out.
Incidentally, EIA expects global consumption of petroleum and other liquid fuels to grow by 1.4 million b/d in both 2016 and 2017.
Since 2012, the agency noted that the U.S. has been the source of much of the global increase in production of petroleum and other liquids. In 2016 and 2017, however, members of the Organization of the Petroleum Exporting Countries (OPEC) are expected to account for most of production growth, with about two-thirds of forecasted decline in 2016 global oil production occurring in the U.S.
OPEC crude oil production is forecast to increase by 0.5 million b/d this year, with Iran accounting for most of that increase. Iran is expected to increase its production once international sanctions are suspended, which EIA assumes will occur in the first quarter of 2016.