EIA Expects US Liquid Fuel Consumption to Decrease in 2008; Increase Again in 2009
08 April 2008
 |
| The EIA forecasts a decline in gasoline and diesel consumption in 2008. Click to enlarge. |
Based on projections of weak economic growth and continuing record high crude oil and product prices, the US Department of Energy’s (DOE) Energy Information Administration (EIA) is forecasting a decrease in consumption of gasoline, diesel and other petroleum products in 2008 by about 85,000 barrels per day (bbl/d). This represents the first year-on-year decline of consumption of motor gasoline in the US since 1991.
The EIA expects that a modest economic recovery in 2009, combined with slightly lower petroleum prices (an average $92.50 per barrel in 2009, compared to an average $101 per barrel in 2008) will boost total US liquid fuels and other petroleum consumption by about 200,000 bbl/d next year.
 |
| Percentage annual change in gasoline consumption. Click to enlarge. |
The EIA made its projections in the April edition of the Short Term Energy Outlook (STEO). The EIA also forecasts that world oil consumption will grow by 1.2 million bbl/d in 2008.
Summer Fuels Outlook in the US. The EIA projects that average regular grade gasoline retail prices, which averaged $2.93 per gallon last summer will increase to an average $3.54 per gallon during the current driving season. The agency expects diesel fuel prices, which averaged $2.85 per gallon last summer, to average $3.73 this summer.
EIA anticipates that the monthly average gasoline price will peak at just over $3.60 per gallon in June, while the monthly average diesel price will peak at just over $3.90 per gallon in April.
These retail price projections reflect higher prices for the refiner’s average acquisition cost of crude oil, projected to average almost $97 per barrel, up from about $67 per barrel last summer. However, for motor gasoline these projections indicate a narrowing of the difference between the gasoline retail price and the average cost of crude oil, due largely to the weak gasoline demand, high inventories, and growth in ethanol production. While the average cost of crude oil is projected to increase by about 70 cents per gallon this summer over last, the average gasoline retail price is expected to increase by only 60 cents. In contrast, summer diesel fuel prices are projected to increase by 87 cents per gallon this summer over last, largely because of strong world distillate demand growth, especially in Europe and Asia.
—STEO April 2008
Ethanol. Domestic ethanol production has increased from an average of 314,000 bbl/d during the summer of 2006, to 418,000 bbl/d during the summer of 2007, and is projected to average 550,000 bbl/d this summer, according to the EIA.
This summer’s domestic gasoline production is expected to be down by about 20,000 bbl/d from last summer’s average. Because of the expected 130,000 bbl/d increase in ethanol production, production of gasoline at US refineries is expected to decline by as much as 150,000 bbl/d this summer.
The increasing size of the ethanol component in the fuel pool is affecting average fuel efficiencies. The EIA, in a supplement to the STEO, noted that the increasing share of lower-Btu content ethanol is contributing to a growing divergence between volume-based and energy-content-based measures of trends in gasoline consumption.
The net energy content of ethanol is only 76,000 Btu per gallon compared to about 114,000 Btu per gallon for motor gasoline produced from crude oil refining. The increase in ethanol’s share of the total motor gasoline pool will therefore reduce average automobile fuel efficiencies. In fact, the substantial increase in the ethanol market share projected for 2008 indicates that, even though motor gasoline consumption is projected to decline by 0.1% for that year on a volumetric basis, it is expected to decline by about 0.6% on a Btu basis.
Resources
Did you ever wonder how oil can go from $20 to $100 per barrel (5 times increase) and gasoline only doubles in price? Is it that Chevron, Exxon, UniCal and other U.S. oil companies are selling oil to the U.S. at below market prices? I find that very unlikely.
Posted by: sjc | 08 April 2008 at 02:43 PM
At $20/barrel oil, thats 42 cents/gallon (for the raw oil), add 20 cent for refining, 50 cents for taxes, 40 cents for delivery, and 10 cents for local retailer profit, and you get a $1.62/gallon gasoline price
At $100/barrel oil, thats $2.38/gallon (for the raw oil), add 20 cent for refining, 50 cents for taxes, 40 cents for delivery, and 10 cents for local retailer profit, and you get a $3.58/gallon gasoline price.
My numbers may be off a little, but you can see why a 5x oil price increase doesn't yield a 5x gasoline price increase.
Posted by: shane | 08 April 2008 at 03:44 PM
sjc - crude oil price is only one factor affected pump prices. The other major component is refinery operating margins.
With the reduced demand, refineries are pressured to reduce prices and profit margins to compensate.
What that does tell you is that the refineries used to make a LOT more money per gallon than they are currently - or are the refineries getting oil at below market prices?
Posted by: Dave | 08 April 2008 at 03:48 PM
What - other than the fact that incumbent politicians like rosy outlooks just ahead of an election - makes EIA think the US economy will be in recovery so soon? The world's bankers are all tapdancing on each other's mines right now and will be for quite a while to come.
@ Dave -
no, refineries have to buy at world market prices. Who else would be buying the crude oil?
You are right about one thing, though. When oil prices are low, the profits are in refining. When they are high, they shift to the upstream side. Heads - Big Oil makes money, tails - they make even more.
Posted by: Rafael Seidl | 08 April 2008 at 05:22 PM
The World Banks have to recover the $1 trillion they have lost in sub-primes and other bad loans.
That may take all of 2008 and 2009.
During that extended credit squeeze, it is doubtful that spending (and fuel consumption) will increase much.
Will oil price go down with reduced consumption? In a free market, it would, but it is not a real free market. OPEP can reduce production to negate the effects of reduced demand.
However, increased competition from ethanol and biofuel + a greater number of Hybrids, PHEVs and BEVs should eventually have an effect on oil price (by 2011/12?). Can OPEP negate this second wave with further production cuts?
Posted by: Harvey D | 08 April 2008 at 08:37 PM
Does anyone know the price for 100% fuel ethanol per gallon? How is the price determined for ethanol anyways? Is it traded the same way as crude oil and gasoline?
Posted by: Troy | 09 April 2008 at 08:23 AM
I think ethanol is about $2.50 per gallon wholesale and gasoline is the same for regular. Ethanol gets a 50 cent subsidy. As far as I know ethanol is traded the same way as wholesale gasoline on the commodities markets. Gasoline blenders would rather not have to blend any ethanol, but are required to by law. The oil companies do not make ethanol.
A barrel of oil yields just over 30 gallons of gasoline as I recall so at $30 a barrel you get $1 material and $1 refining, transport, tax, profit for $2 per gallon retail. At $90 you have $3 material and $1 other for $4 gasoline retail. That says when oil triples in price gasoline doubles in price with those extra costs. You can see as oil prices continue to rise the extra costs becomes a smaller percentage and more of the oil price rise becomes reflected in the price of gasoline at the pump.
I suspect that the price quotes for oil are the high grade light sweet crude on the spot futures markets. Refiners may be able to use the more heavy sour variety which may not sell at those premium price quotes. It seems like most agree that the U.S. oil companies are not selling U.S. oil at a discount.
I would guess that is why oil companies started to sell off their refineries years ago and did not build new ones. It is not the ethanol "wave", but the lack of profitability in refining that caused them to sell. They knew more than 5 years ago that the price of oil was going to rise a lot and knew there was more money in selling oil.
Posted by: sjc | 09 April 2008 at 10:01 AM
I know I am going to buy less gasoline since I am converting one of my trucks to wood gas!! Do a search
and read up on wood gas generators they can free us
from the oil companies but of course if we were to use
say manufactured wood pellet fuel which would be the
ideal way to go, they could jack up the price once folks
got switched to that too! We could be using a truly
sustainable fuel and since trees pull co2 out it would
end up being a self balancing system to a point.
Posted by: mike | 11 April 2008 at 02:12 PM
I would like to start the ANG conversion business in my town. NG is $1 per 100,000 BTU and gasoline is $3.40 for 120,000 BTU. If we can get the activated charcoal ANG tanks, NG compressors and conversion kits, there would be a lot of happy commuters here.
Posted by: sjc | 19 April 2008 at 05:01 PM
CO2 Recycling to E-100 or Green Gasoline which can be used
long time fuel solution including wood chips/grass/food waste to E-100 process can be evaluated for cost & process
machines can be pattern for large size plant capital investment projects.
Posted by: G.K.Patel | 21 April 2008 at 06:31 AM
Here's the obvious short cut that no one ever seems to want to discuss. We can supply at least 90% of our petroleum needs with bio-mass production of hemp which is 10 times as productive as corn when it comes to making ethanol.
Posted by: Stumbler | 27 April 2008 at 09:27 AM
could you pls send me the cost of diesel oil and gas oil and liquified natural gas
best regard
Posted by: MANAL | 15 June 2008 at 06:07 AM