meeting u.s. transportation fuel demand john hackworth joanne shore energy information...
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Meeting U.S. Transportation Fuel Meeting U.S. Transportation Fuel DemandDemand
John Hackworth
Joanne Shore
Energy Information Administration
Energy & Transportation Panel
August 2004
www.eia.doe.govwww.eia.doe.gov
Capacity Surplus Disappearing, Capacity Surplus Disappearing, Creating Short-Term ChallengeCreating Short-Term Challenge
02468
101214161820
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-01
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-03
Mil
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U.S. Refining Capacity & Inputs
Gross Inputs
Operable Capacity
Source: EIA
OverviewOverview
• Transportation demand growth – some uncertainties
• A need for both U.S. capacity & import growth
• New U.S. product specifications limit import sources
• Will gasoline import availability grow?
Demand – A Crucial Factor Affecting Demand – A Crucial Factor Affecting Capacity DecisionsCapacity Decisions
• Future growth forecasts
• What could affect future growth?
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5
10
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25
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90
20
00
Mil
lio
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Transportation
Total End Use
U.S.Petroleum Consumption
Source: EIA
Transportation Demand Growth Drives Transportation Demand Growth Drives EIA’s Reference CaseEIA’s Reference Case
0
1
2
3
4
5
6
7
8
Mil
lio
n B
arre
ls P
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ay
2000 2005 2010 2015 2020 2025
Increases in Petroleum Use for Transportation
Total Transportation Demand13.2 MMB/D in 2000
Source: EIA, Annual Energy Outlook 2004
Efficiency Could Affect Demand,Efficiency Could Affect Demand,But How Quickly?But How Quickly?
10
15
20
25
30
35
40
1970 1980 1990 2000 2010
Fu
el E
con
om
y (M
iles
Per
Gal
lon
) CAFE Estimates (Adjusted EPA)
Cars
Fleet
Fleet
Weight
4063 lbs
Fleet
Weight
3273 lbs
Fleet
Weight
3870 lbs
Future Efficiency
•Materials
•Drag
•Hybrid
•Advanced Batteries
•Advanced Diesel
Source: U.S EPA, Light-Duty Automotive and Fuel Economy Trends: 1975-2003, April 2003.
Historical Efficiencies Affected Historical Efficiencies Affected Demand Relatively QuicklyDemand Relatively Quickly
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
Mil
lio
n G
all
on
s
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Tri
llio
n M
ile
s
Light Duty Vehicle Fuel Use & Miles Traveled 1978-1987
Light Duty Trucks
Cars
Miles TraveledTotal Fuel Use
Source: Department of Transportation, FHA, Highway Statistics 2001, Table VM-1.
Role of Gasoline Imports – Role of Gasoline Imports – Now and in the FutureNow and in the Future
• Historically, imports have been an essential supply source
• Need increased import volume in future• Will import supply be available?
– Why imports have been a competitive supply source
– Future impacts of U.S. specification changes– The impacts of international supply/demand
Imports Have Been EconomicImports Have Been Economic
6500
6700
6900
7100
7300
7500
7700
7900
8100
830019
90
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
0
200
400
600
800
1000
1200
1400
1600
1800U.S. Gasoline Imports & Production (MB/D)
Total Net Imports
Total Production Excl. Blending Compontent Net Imports
Source: EIA
Gasoline Net Imports – An Essential Gasoline Net Imports – An Essential Supply SourceSupply Source
Local Production
Net Imports
Other DomesticProduction
Imports to Other Regions
PADD 1 Share
PADD 1 Sources of SupplyImport Destinations
885 MB/D (2003)
Source: EIA
Import SourcesImport Sources
• Nearby dedicated suppliers– Canada– Virgin Islands– Venezuela
• Nearby economic sources– Western Europe – symbiotic relationship– Eastern Europe– Latin America– Africa
• Other incremental supply– Middle East and Asia
EU-15 Demand Mix May Imply Excess EU-15 Demand Mix May Imply Excess European Mogas SupplyEuropean Mogas Supply
0
50
100
150
200
1990
1995
2000
2005
2010
2015
Mil
lio
n T
on
nes
/Yea
r
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Mo
gas
/Die
sel
Rat
io
Gasoline Diesel Ratio Gasoline/Diesel
Source: History IEA; Forecast Purvin & Gertz
European Choices of New Vehicles European Choices of New Vehicles Show Why Diesel Fuel Growth May Show Why Diesel Fuel Growth May
ContinueContinue
40.3
0
10
20
30
40
50
Per
cen
t o
f N
ew
Reg
istr
atio
ns
1990 1992 1994 1996 1998 2000 2002
W. Europe Diesel-Fueled Vehicle Share of New Passenger Car Registrations
Source: ACEA www.acea.be
EU Hydrocracking Growing, But Not as EU Hydrocracking Growing, But Not as Fast as Mogas/Diesel Demand ShiftFast as Mogas/Diesel Demand Shift
0
2
4
6
8
10
12
14
16
1819
90
1992
1994
1996
1998
2000
2002
2004
Per
cen
t o
f D
isti
llati
on
Cap
acit
y
FCC
Hydrocracking
EU-11 Capacity As Percent of Distillation
Source: EIA
No Change in NWE Price Incentive for No Change in NWE Price Incentive for Diesel over GasolineDiesel over Gasoline
-30
-20
-10
0
10
20
30Ja
n-9
5
Jan
-96
Jan
-97
Jan
-98
Jan
-99
Jan
-00
Jan
-01
Jan
-02
Jan
-03
Jan
-04
Cen
ts P
er G
allo
n
Northwest Europe Spot Gasoline Minus Diesel
Source: Bloomberg; Monthly Average NWE EN590 and 95 Octane Gasoline
2004 Specification Effects on Summer 2004 Specification Effects on Summer Imports into New York/New JerseyImports into New York/New Jersey
Total Gasoline Imports into NY and NJ(Average March through May 2004)
0
50
100
150
200
250
300
350
400
450
2003 2004
Th
ou
san
d B
arr
els
Per
Day
Other
Eastern Europe
Western Europe
Canada & VirginIslands
Source: EIA
Changing U.S. Sulfur Specifications Changing U.S. Sulfur Specifications May Change Import SourcesMay Change Import Sources
Country 2004 2005/2006 2010
U.S. 120 30 30
E.U. 150 50 (10) 10
Brazil 1000 400 80
Argentina 350 50 N/A
South Korea 130 50 N/A
Source: Hart International Fuel Quality Center
Gasoline Sulfur Specifications (ppm)
Some Historical Suppliers Cannot Some Historical Suppliers Cannot Produce Low Sulfur GasolineProduce Low Sulfur Gasoline
0
100
200
300
400
500
600
700
800
900
100019
90
1992
1994
1996
1998
2000
2002
Th
ou
san
d B
arre
ls P
er D
ay Other
Other Latin America
E Europe
Venezuela
W Europe
Virgin Islands
Canada
U.S. Total Gasoline Imports
Source: EIA, Form EIA-814
Shifts in Gasoline Import Sources with Shifts in Gasoline Import Sources with Changes to Lower Sulfur GasolineChanges to Lower Sulfur Gasoline
0
100
200
300
400
500
600
700
800
900
100020
00
2001
2002
2003
2004
Th
ou
sa
nd
Ba
rre
ls P
er
Da
y Other
Other Latin America
Brazil
E Europe
Venezuela
W Europe
Virgin Islands
Canada
U.S. Total Gasoline Imports Jan-May
Source: EIA, Form EIA-814
Gasoline Import AvailabilityGasoline Import Availability
Stable or Increasing• W. Europe
gasoline/diesel imbalance continues
• Increased E. Europe export capability
• Dedicated U.S. import sources remain
• Potentially high U.S. gasoline margins
Decreasing• U.S. gasoline spec
changes limit supply sources in short run
• Demand outside U.S. growing faster than refining capacity
Factors Affecting International Factors Affecting International Product SuppliesProduct Supplies
• High world demand growth– Increases capacity utilization (especially Asia)– Supports high crude oil prices– Increasing imports and product prices
• Import implications of world refining capacity utilization– Asian demand rebound and China’s growth– Capacity growth lagging– Ability to produce light clean products in non-OECD
areas
Annual Demand Changes Vary Annual Demand Changes Vary ConsiderablyConsiderably
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
1971 1976 1981 1986 1991 1996 2001
Th
ou
sa
nd
Ba
rre
ls P
er
Da
y
Annual Change in World Petroleum Demand
Source: EIA, IEA
How Tight is World Refining Capacity?How Tight is World Refining Capacity?
• Recent claims of being maximum sustainable capacity are exaggerated
• Comparing world product demand and capacity can be misleading
• Must look at regional utilizations• However, demand growth is outpacing
capacity growth – for the moment
Overview of World Capacity Utilization Overview of World Capacity Utilization (Percent Gross Inputs/Distillation)(Percent Gross Inputs/Distillation)
1998 2003
U.S. 95.5 92.5
EU-15 94.5 89.1
Latin America 81.4 74.4
Middle East 93.0 87.1
Source: EIA, IEA & BP
U.S. and Western European TrendsU.S. and Western European Trends
50556065707580859095
10019
95
1996
1997
1998
1999
2000
2001
2002
2003
Per
cen
t
Capacity Utilization (Gross Inputs/Distillation)
U.S.
E.U. 15
Source: IEA
Singapore Utilization PatternSingapore Utilization Pattern
50556065707580859095
100Ja
n-9
8
Jul-
98
Jan
-99
Jul-
99
Jan
-00
Jul-
00
Jan
-01
Jul-
01
Jan
-02
Jul-
02
Jan
-03
Jul-
03
Jan
-04
Per
cen
t
Capacity Utilization (Gross Inputs/Distillation)
Source: EIA, IEA, BP
Downstream Capacity ProfilesDownstream Capacity Profiles
U.S
.
Eu
rop
e (6
)
Asi
a (6
)
Mid
dle
Eas
t (E
xpo
rter
s)
0
10
20
30
40
50
60
70
80
Per
cen
t o
f D
isti
llat
ion
C
apac
ity
FCC Hydro-Cracking Hydro-Treating
Source: Oil and Gas Journal Refinery Survey, December 2003
Capacity Additions – Asia & M.E.Capacity Additions – Asia & M.E.
0
1000
2000
3000
4000
5000
6000
Planned
Historical (1995-2004)
0
500
1000
1500
2000
2500
3000
Crude FCC Hydro-cracking
Hydro-treating
PlannedHistorical (1995-2004)
Asia (6)
Middle East
Exporters (4)
Source: Oil and Gas Journal & Press Releases
Thousand Barrels Per Day
Capacity Additions – Europe & U.S.Capacity Additions – Europe & U.S.
0
500
1000
1500
2000
2500
3000
Planned
Historical (1995-2004)
0
500
1000
1500
2000
2500
3000
Crude FCC Hydro-cracking
Hydro-treating
Planned
Historical (1995-2004)
Europe (6)
U.S.
Thousand Barrels Per Day
Source: Oil and Gas Journal & Press Releases
Refining Margin ComparisonsRefining Margin Comparisons
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
1Q-9
3
1Q-9
4
1Q-9
5
1Q-9
6
1Q-9
7
1Q-9
8
1Q-9
9
1Q-0
0
1Q-0
1
1Q-0
2
1Q-0
3
$/B
arre
l
USGC West Texas SourCokingNWE Brent Cracking
Singapore DubaiHydrocracking
Refining Margins
Source: BP Statistical Review 2004
Looking Ahead 3-5 Years: Looking Ahead 3-5 Years: Capacity Growth Less Than Demand GrowthCapacity Growth Less Than Demand Growth
• Capacity lagged demand for past 5 years• Forecasted gasoline demand implies the
need for 1 to 2 MMB/D of added capacity in the next 5 years.
• Improved margins will encourage capacity• But other environment investment
requirements may detract• New product specifications reduce yield in
short term
Looking Ahead 3-5 Years:Looking Ahead 3-5 Years:Import Availability Still A QuestionImport Availability Still A Question
• While the need for product imports increases, changing U.S. specifications may reduce the number of import sources in the short term
• Some changes were met this year, but future specifications more stringent.
• Worldwide refinery utilization increases will have little impact on U.S. import availability