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Meeting U.S. Transportation Fuel Demand : Meeting U.S. Transportation Fuel Demand John Hackworth Joanne Shore Energy Information Administration Energy & Transportation Panel August 2004 www.eia.doe.gov


Capacity Surplus Disappearing, Creating Short-Term Challenge : Capacity Surplus Disappearing, Creating Short-Term Challenge Gross Inputs Operable Capacity Source: EIA


Overview : Overview 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 Capacity Decisions : Demand – A Crucial Factor Affecting Capacity Decisions Future growth forecasts What could affect future growth? Source: EIA


Transportation Demand Growth Drives EIA’s Reference Case : Transportation Demand Growth Drives EIA’s Reference Case Source: EIA, Annual Energy Outlook 2004


Efficiency Could Affect Demand,But How Quickly? : Efficiency Could Affect Demand, But How Quickly? 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 Demand Relatively Quickly : Historical Efficiencies Affected Demand Relatively Quickly Source: Department of Transportation, FHA, Highway Statistics 2001, Table VM-1.


Role of Gasoline Imports – Now and in the Future : Role of Gasoline Imports – Now 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 Economic : Imports Have Been Economic Source: EIA


Gasoline Net Imports – An Essential Supply Source : Gasoline Net Imports – An Essential Supply Source PADD 1 Sources of Supply Import Destinations 885 MB/D (2003) Source: EIA


Import Sources : Import 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 European Mogas Supply : EU-15 Demand Mix May Imply Excess European Mogas Supply Source: History IEA; Forecast Purvin & Gertz


European Choices of New Vehicles Show Why Diesel Fuel Growth May Continue : European Choices of New Vehicles Show Why Diesel Fuel Growth May Continue Source: ACEA www.acea.be


EU Hydrocracking Growing, But Not as Fast as Mogas/Diesel Demand Shift : EU Hydrocracking Growing, But Not as Fast as Mogas/Diesel Demand Shift Source: EIA


No Change in NWE Price Incentive for Diesel over Gasoline : No Change in NWE Price Incentive for Diesel over Gasoline Source: Bloomberg; Monthly Average NWE EN590 and 95 Octane Gasoline


2004 Specification Effects on Summer Imports into New York/New Jersey : 2004 Specification Effects on Summer Imports into New York/New Jersey Source: EIA


Changing U.S. Sulfur Specifications May Change Import Sources : Changing U.S. Sulfur Specifications May Change Import Sources Source: Hart International Fuel Quality Center Gasoline Sulfur Specifications (ppm)


Some Historical Suppliers Cannot Produce Low Sulfur Gasoline : Some Historical Suppliers Cannot Produce Low Sulfur Gasoline Source: EIA, Form EIA-814


Shifts in Gasoline Import Sources with Changes to Lower Sulfur Gasoline : Shifts in Gasoline Import Sources with Changes to Lower Sulfur Gasoline Source: EIA, Form EIA-814


Gasoline Import Availability : Gasoline 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 Product Supplies : Factors Affecting International Product 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 Considerably : Annual Demand Changes Vary Considerably 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 (Percent Gross Inputs/Distillation) : Overview of World Capacity Utilization (Percent Gross Inputs/Distillation) Source: EIA, IEA & BP


U.S. and Western European Trends : U.S. and Western European Trends Source: IEA


Singapore Utilization Pattern : Singapore Utilization Pattern Source: EIA, IEA, BP


Downstream Capacity Profiles : Downstream Capacity Profiles Source: Oil and Gas Journal Refinery Survey, December 2003


Capacity Additions – Asia & M.E. : Capacity Additions – Asia & M.E. 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. Europe (6) U.S. Thousand Barrels Per Day Source: Oil and Gas Journal & Press Releases


Refining Margin Comparisons : Refining Margin Comparisons Source: BP Statistical Review 2004


Looking Ahead 3-5 Years: Capacity Growth Less Than Demand Growth : Looking Ahead 3-5 Years: Capacity 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:Import Availability Still A Question : Looking Ahead 3-5 Years: Import 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


Conclusion : Conclusion Petroleum demand will likely increase over the near term. Increases in both U.S. capacity and product imports will be needed However, the balance between the 2 supply sources is uncertain Both capacity expansion and import growth face large challenges