The API has released their year end report on consumption, and some of the results were quite interesting. They held a blogger call today to discuss the results, but I got tied up and couldn’t make it. If they post a transcript, I will check it out and may excerpt some portions.
U.S. fuel production at record-high in 2007, demand flat – API
WASHINGTON – U.S. fuel production reached a record high in 2007 as refinery capacity expanded for the 11th straight year, API data show. U.S. crude oil production also rose in 2007, the first annual increase since 1991, according to API’s year-end Monthly Statistical Report.
The API statistics also showed that U.S. oil demand was flat in 2007, the third straight year of stagnant or lower oil demand in the world’s largest oil-consuming nation.
“While much of the increase in crude oil production represents a recovery from 2006’s depressed levels, our latest drilling figures show tremendous industry efforts to develop additional supplies from those regions that are open to exploration.,” said Ron Planting, manager, information and analysis, for API.
Given the higher domestic production and flat demand, total oil imports fell 1.9 percent from year-ago levels, though imports still cover about 65 percent of U.S. oil demand.
“Despite high oil prices, the industry worked hard to meet the needs of consumers by producing record amounts of fuel,” said API Chief Economist John Felmy. “Consumers appear to be responding to the higher prices at the margin.”
Total U.S. petroleum deliveries, a proxy for demand, averaged 20.7 million barrels per day, the same level seen in 2006, following a decline of 0.6 percent in that year. In the fourth quarter alone, deliveries slumped 0.4 percent.
Despite a one percent year-on-year increase in the first quarter, gasoline demand was lagging about half a percent below 2006 levels by the fourth quarter. On the other hand, distillate fuel oil demand rose 1.5 percent in the year amid rising diesel demand and higher home heating demand.
The demand data includes an increase in the amount of ethanol blended into gasoline, which averaged more than 400,000 barrels per day. Excluding ethanol, which accounted for nearly five percent of all gasoline sales during the year, total domestic oil deliveries in 2007 actually fell half a percent. An estimated 6.7 billon gallons of fuel ethanol were used by refiners in 2007, some two billion gallons more than the 4.7 billion gallons required by law but more than two billion gallons less than the recently-passed requirement for 2008.
So, three years in a row of stagnant oil demand. Is that because production has been flat, or have high prices caused demand to stay flat? Gasoline demand also reportedly fell, which would (I believe) be the first decline in quite some time. Are higher prices responsible, or is ethanol primarily responsible? Increased ethanol production is certain to be putting some pressure on natural gas prices; besides corn farmers, natural gas producers benefit from the ethanol mandates.
And does our government really think we should bump up the 2008 usage of ethanol to 9 billion gallons? (Yes, they do). Egads, I am going to plant some corn and get rich quick.