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Demand Destruction? Not Much in the U.S. It Seems
The American Petroleum Institute reported that demand for all “crude oil and petroleum products” in the U.S. in May declined by a tiny .1% compared with May, 2007. While gasoline fell a substantial 1.4%, demand for heating oil and diesel fuel rose by 5.5%. Go figure.
My observation regarding petroleum statistics: they are myriad, they are sometimes contradictory, they are nearly always revised later, and when you put them all together it is often not clear as to whether you have learned anything that is true or relevant. Sometimes it seems to me that the only statistic that tells the full truth is the price of oil.
But just remember, that’s only the price for one grade of oil, then there’s…oh well.
Here is the full report from Reuters:
May oil demand down 0.1 pct from year ago: API
Wed Jun 18, 2008 3:31pm BST
By Chris Baltimore
WASHINGTON (Reuters) - Demand for crude oil and petroleum products in May fell a slight 0.1 percent from a year earlier, and U.S. gasoline use for the January-May period dropped for the first time since 1991, as record-high pump prices dented demand, the American Petroleum Institute said on Wednesday.
Total petroleum product deliveries, excluding exports, averaged 20.614 million barrels per day, down 17,000 bpd from May 2007, the API said in its monthly oil report.
Sagging gasoline and residual fuel use was nearly offset by strong demand for distillates and jet fuel, the API said.
“Gasoline demand has weakened with higher prices, but diesel demand has proved to be more resilient,” said Ron Planting, an analyst at the API.
Deliveries, which are a good indicator of demand, are calculated by the API to reflect petroleum products moved from refineries and bulk storage to wholesale and retail suppliers.
U.S. refineries churned out record amounts of distillate and ultra-low sulfur diesel in May, and jet fuel output rose 6.6 percent from the prior year, the API said.
Meanwhile gasoline demand in May fell by 133,000 bpd, or 1.4 percent, to 9.296 million bpd as crude oil prices rose to around $135 a barrel and pump prices climbed to near $4 a gallon nation-wide.
Deliveries of distillate fuel oil — including heating oil and diesel fuel — jumped 222,000 bpd, or 5.5 percent, to 4.282 million bpd, the API said.
Jet fuel demand jumped 5.1 percent to 1.697 million bpd - the highest level since August 2007 and the first year-to-year increase in seven months, the API said. Residual fuel use fell 10.1 percent to 674,000 bpd.
On the supply side, May crude oil imports averaged 9.461 million bpd, down 8.1 percent. Petroleum product imports declined 21.5 percent to 3.04 million bpd, the API said. Total fuel imports were at their lowest level for May since 2002.
(Reporting by Chris Baltimore; Editing by Marguerita Choy)
Tags: peak oil energy investments
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5 responses so far ↓
1 K. Vora // Jun 18, 2008 at 8:37 pm
1. Numbers without error bounds, especially large numbers, are dangerous.
Economy is slowing, driving is down. Import levels confirm this. 8.1% decrease in crude oil is very significant and does not bode well for the economy. Generally, I would see cars zooming away on the distance road at this time of the night (~11:00 pm), but there is nothing in sight. Refined products have to be delivered and there is a lag before refinaries adjust to demand. Storage acts as buffer.
2. Saudi motivations: preserve the demand. Decoupling from dollar is nonstarter as Saudis are heavily invested in the US. Saudis depend on the US for defense, and that is not going to change. They really want to contain newly started uncontrolled futures exchanges. simply, the speculation in oil is out of control, and speculators are making more than the producers.
3. Euro is a glorified currency, and Europe’s financial system and politics are very fragmented and slow. Europe has energy crisis, and subprime crisis. Finally, it is very expensive to live there.
2 mark dibble // Jun 19, 2008 at 6:02 am
I continue to ask this question: why do our polititians consistently strive to raise the price of oil. Some reasons include discontinued subsidies on wind generation, no nuclear, no drilling. It is almost like the realization of future needs are not apparent. I wondered if they are trying to make green methods more viable, trying to recognize votes in the farm states, etc. Any ideas?
3 Mike K // Jun 19, 2008 at 7:02 pm
Elasticity of petroleum demand in the US is THE big demand side issue. At some point, at some price, there will be demand destruction, but apparently we aren’t there yet. I remember back in college (during the ’70’s oil shocks 1 &2) my economics professor lecturing on the fact that total consumer expenditures on transportation tended to be a fairly constant (~12%) of aggregate consumer expenditures. The point here was that as the price of oil went up, consumers would trade-off other transportation expenditures (eg. delay new car purchase) to keep their total transporatation expenditures at a constant percentage of their incomes. It seems, at least for now, that the same phenomenon is occurring - auto sales are down significantly. Under this theory, oil prices have more room to run before it crowds out other transporation expenditures to the point where demand for the commodity is finally reduced.
4 Jonathan M // Jun 21, 2008 at 4:58 am
An over-simplified answer for growth in jet fuel and heating oil demand, is that businesses that are completely dependent on oil price have to be buy now to define their future business costs. Since oil is so expensive, they need to be able to define their costs now if they are going to have any chance to define resale prices that will allow for any form of a profit margin. These are the businesses feeling the greatest squeeze in this spike, airlines, home heating oil companies etc.
5 Jim Kingsdale // Jun 21, 2008 at 9:28 am
Jonathan, good point - an insight into the fact we often can’t take oil related statistics at face value.
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