New Jersey Petroleum Sector Overview

Clinton J. AndrewsE.J. Bloustein School of Planning and Public Policy

Rutgers, The State University of New Jersey

September 15, 2005

http://policy.rutgers.edu/andrews

AAA 2005

Average NJ Regular Gas Prices

Current 3.10 $/gallon

Yesterday 3.12

Month Ago 2.43

Year Ago 1.79

EIA 2005

U.S Gas Prices--Long TermReal Gasoline Pump Price: Annual Average 1919-2006

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AAA 2005

Petroleum Price Problems

Petroleum market suffers from dramatic and persistent price volatility.

Unresponsive demand, lumpy supply, difficult to balance them.

Both consumers and producers seek external interventions that improve price stability.

AAA 2005

5 Price Stabilization Regimes

Standard Oil monopoly (< 1911) Texas Railroad Commission’s internationally

influential pro-rationing of production (>1930s) Seven Sisters cartel (Exxon, Shell, British

Petroleum, Mobil, Chevron, Texaco, and Gulf) (1920s - 1970s)

OPEC (1960 - present) effective only briefly during the 1970s-80s

Saudi-American regime (1970s - present)

EIA 2005

Components of U.S. Gas Price

EIA 1999

Gasoline Market Price Lags

(Lags cause an appearance of downstream price stickiness)

Supply Chain Stage Relevant Price Typical Pass-through Time (Weeks)

Crude Oil Crude Oil Spot Market Price

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Retail Station Retail Gasoline Price 4

EIA 2004

U.S. Average Profit Rates

Hinton 2005

New Jersey - Consumption

#10 in Population (8,698,879 in

2004)

#4 in Per Capita Income ($41,332 in 2004)

#13 in Total Energy Consumption (2.5 quads in 2001)

#38 in Per Capita Energy Consumption (294 million Btu in

2001)

#9 in Total Petroleum Consumption (26 million GPD in

2001)

#11 in Gasoline Consumption (10.8 million

GPD in 2001) #11 in Distillate Fuel

Consumption (4.4 million GPD in 2001)

#14 in LPG Consumption (0.9 million GPD in 2001)

#4 in Jet Fuel Consumption (3.9 million GPD in 2001)

Hinton 2005

New Jersey - Upstream Supply

Crude oil reserves, production, wells, rigs: None

Major Pipelines:LPG: None Crude Oil: NoneProduct: Colonial, Buckeye, Sun

Ports: Jersey City, Sayreville, Sewaren, Perth Amboy, Linden, Carteret, Woodbridge, Elizabeth, Bayonne, Newark, Deepwater, Crab Point, Paulsboro, Gloucester, Camden, Pennsauken, Burlington, Duck Island

Based on data in EIA 2005a

NJ Petroleum Product Imports 2004 by Product

Crude Oil53%

All Other47%

United Kingdom10%

Canada9%

Saudi Arabia9%

Venezuela9%

Nigeria8%

Angola5%

Russia4%Norway

4%

Mexico4%

Algeria4%

Virgin Islands US3%

Netherlands3%

Gabon3%

45 other countries25%

Hinton 2005

New Jersey - Downstream Refining

Total distillation capacity of 615,000 BCD (~26 million GPD) in 2005

Amerada Hess (Port Reading @ -0- BCD) Chevron USA (Perth Amboy @ 80,000 BCD) Citgo Asphalt Refining (Paulsboro @ 51,000

BCD idle on 1/1/05) Sunoco (Westville @ 145,000 BCD) ConocoPhillips (Linden @230,000 BCD) Valero Refining NJ (Paulsboro @ 160,000 BCD)

Hinton 2005

New Jersey - Retail

Gasoline Stations:3,608 outlets in 2005~2.1% of U.S. total

Gas Taxes:10.5 cents/gallon NJ tax(18.7 cents/gallon wtd US average state tax)+18.4 cents/gallon Federal tax

19% of NJ homes are heated by oil. Note that NJ has a 1 million barrel heating oil reserve in Woodbridge.

Based on Musgrave 1958

Classical Rationales for Governmental Action

“above all, do no harm” Improve allocational efficiency

(correct market failures like pollution) Improve distributional equity

(correct gross unfairnesses like freezeouts) Improve macro stability

(correct structural imbalances like trade deficits)

Controversial: enforce national norms, pursue national objectives, cater to special interests?

AAA 2005

Energy Policy Rationales

Security improvements (reliability of supply, self-sufficiency, non-proliferation)

Economic improvements (reasonable prices, less price volatility, job growth)

Environmental improvements (climate change, air pollution, water pollution, land damage)

AAA 2005

Some Questions To Ask

Is there documented price gouging in NJ? Are special product demands (e.g., jet fuel) affecting

refineries’ ability to deliver gasoline, heating oil? Are high energy prices slowing economic growth? Is a new global price stabilization regime needed? How should NJ balance economic, security, and

environmental objectives of energy policy in longer run?

AAA 2005

References Hinton, D. (2005) Petroleum Profile: New Jersey,

online at http://tonto.eia.doe.gov/oog/info/state/nj.html

EIA (Energy Information Administration), U.S. Dept. of Energy (2005) Gasoline and Diesel Fuel Update, online at http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp

EIA (Energy Information Administration), U.S. Dept. of Energy (2005a) Company Level Imports, online at http://www.eia.doe.gov/oil_gas/petroleum/data_publications/company_level_imports/cli.html.

EIA (Energy Information Administration), U.S. Dept. of Energy (1999) Price Changes in the Gasoline Market, online at http://www.eia.doe.gov/oil_gas/petroleum/analysis_publications/pet_analysis_publications.html.

EIA (Energy Information Administration), U.S. Dept. of Energy (2004) Where Does My Gasoline Come From?, online at http://www.eia.doe.gov/neic/brochure/gas04/gasoline.htm.

FHA (Federal Highway Administration), U.S. Dept of Transportation (2003) Tax Rates on Motor Fuel, online at http://www.fhwa.dot.gov/ohim/mmfr/dec03/mf121tpg1.htm

AAA (American Automobile Association) (2005) Fuel Gauger Report, online at http://www.fuelgaugereport.com/NJavg.asp.

U.S. Department of Energy, Energy Information Administration, Energy in the United States: 1635 – 2000. Downloaded May 22, 2004 from http://www.eia.doe.gov/emeu/aer/eh/frame.html.

R.A. Musgrave, The Theory of Public Finance. New York: McGraw Hill, 1959.

Appendix

USDOE 2004

U.S. Energy Use, 1635-2000 (Quadrillion Btu)

EIA 2004

U.S. Energy Flows in 2004 Quadrillion Btu

USDOE 2004

U.S. Petroleum Balance 1949-2000

EIA 2004

U.S. Petroleum Flows

EIA 2004

Origins of U.S. Oil Imports

EIA 2004

Worldwide Reserves

AAA 2005

Petroleum Balance of Trade 2001

Importers Exporters

Country Oil Imports as % of Consumption

Country Oil Exports as % of Consumption

Oil as % of Export Earnings

China 31 Canada 41 14

France 96 Iran 176 85

Germany 95 Nigeria 640 98

Haiti 100 Norway 3042 57

Iceland 100 Saudi Arabia 477 90

Japan 98 UK 45 8

Jordan 100 Venezuela 399 73

USA 55 Vietnam 111 20

EIA 2004

Basic Industry Flows

EIA 2004

Products Made from Crude Oil (gallons per 42 gallon barrel)

EIA 2004

Typical Refinery Yield

EIA 2004

U.S. Refining Capacity

EIA 2004

U.S. Cost of Crude Oil

EIA 2005

U.S. Gas Prices - MonthlyRegular Gasoline Prices: Nominal and Real

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Based on data in EIA 2005

NJ Retail Gas Prices 2000-2005

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EIA 2005

PADD Regions

EIA 2005

Regional Refinery Capacity

EIA 2005

Regional Inventories

EIA 2005

Regional Movements

EIA 2005

Regional Imports

EIA 2005

Regional Consumption

EIA 2004

Reformulated Gasoline Areas