U.S. retail pump price averages for both diesel and gasoline declined again this week, according to data tracked by the Energy Information Administration (EIA), with a new report expecting global oil process to remain depressed for the next decade.
The national average for diesel decreased 4 cents this week to $2.84 per gallon, EIA noted; a $1.151 per gallon cheaper compared to the same week in 2014.
Prices for diesel dropped in every region of the country, the agency said, with prices in only three now remaining above the $3 per gallon mark:
- California at $3.096 per gallon, down 5.6 cents for the week;
- New England at $3.164, down 3.6 cents;
- The Central Atlantic at $3.179, down 5.2 cents.
The national average for gasoline dipped 9/10ths of a penny to $2.448 per gallon, EIA reported, which is $1.131 per gallon cheaper compared to the same week in 2014.
Gasoline prices increased in three regions of the U.S., the agency pointed out:
- The East Coast, up a penny to $2.371 per gallon;
- The Lower Atlantic, up 4.4 cents to $2.337;
- The Rocky Mountains, up one cent to $2.313.
The West Coast is the only region in the nation where gasoline remained at or above the $3 per gallon market, EIA said; down 4.7 cents to $3 per gallon exactly, which is also the largest drop in gasoline prices for the week.
EIA did note that, with California removed from the mix, the West Coast’s average gasoline price for the week dropped 2.8 cents to $2.639 per gallon.
Fuel prices could also remain on a downward trend over the next decade, as global oil prices may stay low for the next 10 or 20 years, according to Frank Wolak, who serves as the Holbrook Working Professor of Commodity Price Studies in the Department of Economics at Stanford University.
He said in a new report issued this week that the most likely medium-term price point for global oil prices over the next one to two decades is $50 to $70 per barrel.
And while geopolitical and environmental issues may unexpectedly arise that turn oil prices upward, Wolak in a new policy brief for the Stanford Institute for Economic Policy Research that many factors point to lower oil prices for the foreseeable future – with the primary reasons including the slowing demand for oil in the industrialized world and ever-advancing technological change in the extraction and use of oil.
Record domestic oil production is adding to that downward price pressure as well, EIA added.
U.S. crude oil production overall increased by 1.2 million barrels per day (bbl/d) to 8.7 million bbl/d during 2014 – the largest volume increase since recordkeeping began in 1900, the agency said.
On a percentage basis, output in 2014 increased by 16.2%, the highest growth rate since 1940.
Most of that increase during 2014 came from tight oil plays in North Dakota, Texas, and New Mexico where hydraulic fracturing and horizontal drilling were used to produce oil from shale formations, EIA noted.
In percentage terms, the 2014 increase is the largest in more than six decades with U.S. crude oil production increasing in each of the previous six years. This trend follows a period from 1985 to 2008 in which crude oil production fell in every year except one, EIA pointed out.
That’s a major reason why global crude oil prices fell from a high of $115 a barrel in June 2014 to a low of $45 in January of this year, Stanford’s Wolak said.
Although oil production is expected to rise in 2015 and again in 2016, the growth is not expected to be as strong as in 2014, EIA added.
Since mid-2014, the price of crude oil has fallen about 50%, which has slowed production in marginal drilling areas and focused investment in the more developed areas of tight oil plays.
As a result, annual crude oil production is expected to grow more slowly over the next two years, the agency predicted; at 8.1% for this year and 1.5% in 2016.