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Energy Tomorrow Blog

Divergent Times for U.S. Oil and Natural Gas Demand, Supply

monthly-stats-report  supply  oil demand  imports 

Dean Foreman

Dean Foreman
Posted September 22, 2021

Economics and energy market data for the third quarter of 2021 were marked by divergences. That’s the main thrust of API’s quarterly Industry Outlook for Q3 2021 and Monthly Statistical Report (MSR) with primary data for August. 

Demand for oil and natural gas has risen strongly along with the economic recovery, as we discussed here. At the same time, global oil and natural gas investments have fallen to record lows so far in 2021, (see here). Consequently, supplies have failed to keep pace with demand and generally resulted in lower inventories, higher U.S. imports and the strongest prices for crude oil, gasoline and natural gas since 2014.

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Low Investment and Implications for Global Supply

investments  global energy  oil supply 

Dean Foreman

Dean Foreman
Posted September 17, 2021

Global oil and natural gas investments have fallen to record lows so far in 2021, as we recently discussed here. Yet, demand for both has risen alongside the economic recovery. Consequently, supplies haven’t kept pace with demand, and the mismatch between the two propelled gasoline and natural gas prices this summer to their highest levels since 2014.

 

In fact, global natural gas prices set a record-high for summer months as demand outdistanced supply.  Oil prices eased in August following a 16% run-up over the previous three months for Brent crude oil, but were back above $70 per barrel in mid-September.

 

Although economic and pandemic-related uncertainties and expected OPEC+ output increases have also likely impacted prices, the lack of investment for oil and natural gas production is an ominous sign, given that major conventional global oil and natural gas projects can take years to start producing. We could be in for global oil market tightening in 2022 and further upward pressure on prices, with prices already at their highest level since 2014.

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Price Inflation Could Imperil the Economic Recovery

consumers  prices  energy costs 

Dean Foreman

Dean Foreman
Posted September 1, 2021

One of the great stories of the U.S. energy revolution is that, as it broke productivity records, it ultimately imposed downward pressure on the prices for energy and other goods and services, benefiting U.S. household budgets.

 

Yet, so far in 2021, prices have risen for energy and most other goods – and could bring unfavorable surprises for macroeconomic policies and households alike.

 

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API MSR: Highest Petroleum Demand Since 2019; Imports and Prices Rose in July

monthly-stats-report  demand  consumers 

Dean Foreman

Dean Foreman
Posted August 19, 2021

As the summer driving season motors on, we’re watching not only the impacts of seasonally higher gasoline prices on U.S. households, but also costs in other areas affecting family budgets – and whether those costs are seasonal or longer-lasting. This is the context for API’s new Monthly Statistical Report (MSR), based on July data.

   

As we discussed here, U.S. consumers have benefitted recently from fuels and products derived from relatively inexpensive domestic crude oil and natural gas – well below international price levels. This was due to abundant domestic crude oil production. 

That’s changed now. Domestic production is lower, partly due to the aftereffects of the 2020 COVID-19 recession as well as the delay or cancellation of energy projects that take years to complete.  In this sense, the pulse of U.S. petroleum markets is vital, and API’s primary data can offer a leading perspective.

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The White House, OPEC and the Need for Domestic Oil Production

president  opec  federal leases  domestic oil production 

Dean Foreman

Dean Foreman
Posted August 16, 2021

Some observations follow on the Biden administration’s continued call for OPEC to increase its crude oil production – even as it curbs or discourages U.S. production – plus the president’s recent announcement  that he wants the Federal Trade Commission (FTC) to investigate summer gasoline prices.

We’ll take the FTC first. Chair Lina Khan has been asked to look into any potential illegal conduct or anti-competitive practices that may have occurred during the summer driving season.

The U.S. Energy Information Administration (EIA) reported the national average for gasoline reached $3.172 per gallon Aug. 9, the highest point since October 2014. “[T]here have been divergences between oil prices and the cost of gasoline at the pump,” wrote National Economic Council Director Brian Deese. “While many factors can affect gas prices, the president wants to ensure that consumers are not paying more for gas because of anti-competitive or other illegal practices.”

Numerous federal and state agencies have investigated the causes of price spikes for decades and consistently have found that the markets and other factors are responsible for price fluctuations. If the White House truly believes “anti-competitive or other illegal practices” have elevated gasoline prices, it’s strange that it would look to a cartel of oil-exporting countries to help solve the problem. In fact, the administration is floating a false premise on what’s happened this summer with gasoline prices.

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MSR: June Petroleum Demand Outpaces Supply, Imports Rise

monthly-stats-report  demand  supply  economic growth 

Dean Foreman

Dean Foreman
Posted July 21, 2021

It’s great for the U.S. economy that, with urban re-openings and the onset of the summer driving season, petroleum demand returned to over 20 million barrels per day (mb/d) in June, according to API’s primary data presented in our latest Monthly Statistical Report (MSR).

 

However, domestic oil supplies have not been able keep pace, and consequently U.S. crude oil imports and consumer prices have suddenly risen, which ultimately could contribute to the list of expenses stressing household budgets, such as higher costs for housing, vehicles and many other goods and services.

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Oil Demand Back, But Supply Remains Key Question

monthly-stats-report  supply  oil demand 

Dean Foreman

Dean Foreman
Posted June 17, 2021

The expectations and real prospects for global and U.S. economic recovery – and energy markets along with them – have accelerated and appear bright. That’s the overarching point in API’s quarterly Industry Outlook for Q2 2021 and Monthly Statistical Report (MSR), echoing what we have said since the third quarter of last year (see here, here and here). 

 

Yet, while API’s primary data for May 2021 show the recoveries in U.S. economic growth and petroleum demand have continued to go hand-in-hand, potential record global oil demand growth this year and the next, per the U.S. Energy Information Administration (EIA), could be overshadowed by the lowest industry-wide real capital expenditures on record for any quarter, by API estimates.

 

Demand up and capital investment down by record amounts is a concerning combination.

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Nation's Need for Secure, Accessible Energy at Stake in Policy Debate

us energy security  domestic production  pipelines  policy 

Dean Foreman

Dean Foreman
Posted June 10, 2021

Throughout the 2021 economic recovery, API’s data have demonstrated the intertwined relationship between the nation’s recovering economy and affordable, reliable energy. Leading economic indicators have continued to rise, and along with them so has oil demand – even as domestic oil drilling and supply have fallen.

According to the current Bloomberg consensus of economic forecasters, U.S. real GDP growth could average 6.6% in 2021 compared with 2020 -- its strongest expansion since 1984, when the real price of West Texas Intermediate crude oil was just over $70 per barrel.  Coincidentally, recent oil prices have been at similar levels, and the key question now is whether we have the energy supply to support such a torrid pace of growth.

In that context, actions by the Biden administration that negatively impact or could impact domestic oil and natural gas production appear detached from the nation’s critical need for secure, accessible energy.

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MSR: U.S. Petroleum Demand Up, Pushing Domestic Production to Keep Pace

monthly-stats-report  energy demand  gasoline demand 

Dean Foreman

Dean Foreman
Posted May 20, 2021

API’s primary data for April 2021 evidenced momentum for the broader U.S. economic recovery, as petroleum demand and refining activity rose, supply remained solid and leading economic indicators pointed higher.

The April headline figure was that total U.S. petroleum demand of 19.6 million barrels per day (mb/d) rose by 2.5% from March and to within 3.5% of its level in April 2019, which was its highest for the month in 11 years.

Contemplate that for a second: For all of the dislocation and continuing issues with recovery from COVID-19 pandemic, total petroleum demand in April was within a sliver of where it was that record-setting April of 2019.

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The Story Behind the Recent Rise in Airline Ticket Prices

jet fuel  consumers 

Dean Foreman

Dean Foreman
Posted April 28, 2021

We’ve written quite a bit recently about how the economic recovery so far has spurred increased demand for oil and refined products (see herehere, and here). The demand for air travel and consequently jet fuel, which historically have related strongly to the pace of economic growth, lagged the economy so far.

In fact, U.S. passenger traffic in April 2021 was roughly half of what it was in 2019, per the Transportation Safety Administration, so many people are asking why ticket prices have already begun to rise. After all, even as summer approaches, aren’t there a lot of idle planes and crews eager to be re-hired and return to service?   

There is in fact a lot of idle capacity. Yet, ticket prices also seem to have increased recently and outpaced the return of passengers – for example, with recent price spikes for airfare to some attractive destinations.

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