Fuel Demand: An Economic Indicator
Jane Van Ryan
Posted July 16, 2009
If you're looking for an indicator that describes the current economy, look no further than API's oil demand and supply statistics. API reported today that U.S. petroleum deliveries--a key measure of demand--in the first six months of 2009 fell to its lowest level for the time period in more than a decade.
Jet fuel demand in the first half of the year was down nearly 13 percent, and distillate fuel demand, which includes diesel fuel, fell 8.6 percent. Gasoline demand for the January-through-June period declined from last year's low level by about 1 percent. Clearly, the sagging economy has had a major impact on air travel, freight deliveries and personal travel this year.
"The biggest declines we've seen are for diesel fuel," said Ron Planting, API's statistics manager, "and demand was lower in the second quarter of 2009 than in the first quarter."
The weak economy and sluggish demand also are having a major impact on inventories. Distillate stocks are their highest level for any month since 1986. Although crude oil inventories have fallen by 22 million barrels since April due to OPEC production cuts, they still are 53 million barrels higher than a year ago.
At the same time, U.S. crude oil production reached its highest level in four years in the first half of 2009, reflecting new production from the offshore Gulf of Mexico, North Dakota and other onshore areas. In June, the nation's refineries processed nearly 15 million barrels of crude oil per day and reached an average utilization rate of 84.5 percent. The Federal Reserve Board reported that the utilization rate for all manufacturing industries stood at 64.7 percent of capacity in June.
It's unclear how much refining capacity will be needed in the United States in coming years. According to a new report from the Energy Information Administration (EIA), increased use of ethanol and better fuel mileage are expected to slow the rate of motor fuel demand growth, thus lowering perceptions about the need for refinery capacity expansions. Still, from January 1996 through January 2008, the industry added the equivalent of one medium-sized refinery every year.
Read more in API's Monthly Statistical Report.