U.S. oil outlook: Liquid fuel consumption rate grows

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U.S. Liquid Fuels Consumption.  Total consumption of liquid fuels in 2010 grew by about 410 thousand bbl/d, or 2.2 percent, the highest rate of growth since 2004 (U.S. Liquid Fuels Consumption Chart).  In contrast, projected total U.S. liquid fuels consumption in 2011 falls by 230 thousand bbl/d (1.2 percent), revised downward from the previous Outlook's 170 thousand bbl/d (0.9 percent) decline as the 2011 U.S. real GDP growth forecast has been lowered for the seventh consecutive month.  Motor gasoline consumption accounts for much of the projected decline for the year.

EIA expects total liquid fuels consumption to increase by 90 thousand bbl/d (0.5 percent) to 19.1 million bbl/d in 2012. Projected motor gasoline consumption rises by 40 thousand bbl/d (0.5 percent) as highway travel increases modestly, and distillate fuel consumption increases by 30 thousand bbl/d (0.7 percent) as growth in industrial activity and non-petroleum imports continues to slow as a result of continuing weak economic growth.

U.S. Liquid Fuels Supply and Imports.  Domestic crude oil production, which increased by 110 thousand bbl/d in 2010 to 5.5 million bbl/d, increases by a further 180 thousand bbl/d in 2011 and by 70 thousand bbl/d in 2012 (U.S. Crude Oil and Liquid Fuels Production Chart), driven by increased oil-directed drilling activity, particularly in unconventional shale formations.

The rapid growth in U.S. ethanol production since the mid-2000s is projected to slow with total production averaging 900 thousand bbl/d in 2011 and 910 thousand bbl/d in 2012.  Assuming ethanol net exports average roughly 40 thousand bbl/d next year, EIA expects that 870 thousand bbl/d of ethanol will be blended into gasoline in 2012, which is sufficient to meet the requirements of the renewable fuels standard (RFS).  The expiration of the Federal motor fuels excise tax credit for ethanol blending is expected to have little effect on ethanol blending levels, as ethanol producers do not currently appear to be capturing much of the value of the credit.

Liquid fuel net imports (including both crude oil and refined products) fell from 57 percent of total U.S. consumption in 2008 to 49 percent in 2010 because of rising domestic production and the decline in consumption during the economic downturn.  EIA forecasts that liquid fuel net imports' share of total consumption will decline further to 46 percent in 2011 before rising slightly to 47 percent in 2012.

U.S. Crude Oil and Petroleum Product Inventories.  Commercial crude oil inventory levels ended September 2011 at an estimated 336 million barrels, 26 million barrels below last year but 7 million barrels higher than the previous 5-year average for that month.  Commercial crude oil stocks are gradually drawn down to 317 million barrels by the end of 2012, close to their 5-year average (U.S. Crude Oil Stocks Chart).

Total motor gasoline stocks at the end of September 2011 were an estimated 214 million barrels, down 5 million barrels from last year but 6 million barrels above the previous 5-year average for that month.  Distillate fuel oil stocks ended September 2011 at an estimated 157 million barrels, down 10 million barrels from the same time last year but 7 million barrels above the previous 5-year average.  Projected total motor gasoline and distillate inventories average about 3 million barrels and 8 million barrels higher, respectively, than their previous 5-year averages at the end of 2012 (U.S. Gasoline and Distillate Inventories Chart). The Northeast Home Heating Oil Reserve, which was emptied earlier this year because of the move to low-sulfur heating oil in several northeast States next year, is expected to be restocked with 650,000 barrels this month and 350,000 barrels next month. 

U.S. Petroleum Product Prices.  EIA forecasts that the annual average regular-grade gasoline retail price, which averaged $2.78 per gallon in 2010, will increase to an average of $3.52 per gallon in 2011, and average $3.43 per gallon in 2012 (U.S. Gasoline and Crude Oil Prices Chart).  The increase in retail prices in 2011 reflects not only the higher cost of crude oil but also changes in the average U.S. refinery gasoline margin (the difference between refinery wholesale gasoline prices and the average cost of crude oil).  The average U.S. refinery gasoline margin increases from $0.34 per gallon in 2010, to $0.51 per gallon in 2011, then declines to $0.43 per gallon in 2012.

EIA expects that on-highway diesel fuel retail prices, which averaged $2.99 per gallon in 2010, will average $3.80 per gallon in 2011, and $3.73 per gallon in 2012 (U.S. Diesel Fuel and Crude Oil Prices Chart).  Projected U.S. refinery diesel fuel margins increase from an average of $0.39 per gallon in 2010 to $0.64 per gallon in 2011, then fall to an average of $0.56 per gallon in 2012.


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