US gasoline demand strong in 2002, other markets lag

Feb. 10, 2003
US gasoline demand in 2002 was strong, but most other petroleum product demand was dramatically lower, the American Petroleum Institute reported.

US gasoline demand in 2002 was strong, but most other petroleum product demand was dramatically lower, the American Petroleum Institute reported.

API economists said overall demand for petroleum increased only 0.1% for the year. API attributed this to several factors, including: the aftermath of the Sept. 11, 2001, terrorist attacks, an unusually warm winter, price volatility, supply fluctuations from the Organization of Petroleum Exporting Countries, and a slow national economy.

Gasoline was the only major petroleum product to sustain demand growth in 2002, with its strongest showing in 4 years, increasing by 2.7% compared with 2001, API said.

John Felmy, API director of policy analysis and statistics, called 2002 "one of immense challenges for the world, the nation, the economy, and the petroleum industry." He predicted 2003 would be "another challenging year," although he stressed that the oil industry is committed to meeting customer needs.

US consumers should know that the oil industry "will make every effort to see that consumer fuel needs will continue to be met," he said.

Felmy said there is no sure way to predict whether there will be price spikes in oil or gasoline this year because of the many factors that influence world markets.

While API members are concerned about the loss of crude supplies from Venezuela and possibly Iraq, there is no need yet for government officials to release oil from the Strategic Petroleum Reserve, Felmy said. "Let's keep our powder dry," he said. "The (market) system seems to be working."

API and the Energy Information Administration reported that US crude inventories during the week ended Jan. 10 fell to 272 million bbl, a level at which some western countries theoretically would consider drawing down emergency stockpiles. But Felmy said that trigger level was developed before industry became more sophisticated in managing stock levels.

Changing needs met

He also noted that US petroleum companies have increased worldwide and domestic sources of crude oil with available new technologies. "Even if there is a temporary disruption as a result of events in Venezuela or the Middle East, there remain other significant sources of oil," Felmy said.

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API also reported that total petroleum imports fell sharply by 4.5% compared with 2001. Crude imports were down 3%, imported products fell by 10%, and US dependency on imports declined to 57.6% (Fig. 2b), the lowest level since 1999, officials said.

Other highlights

Compared with 2001, kerosine jet fuel deliveries were down 2.5% in 2002, declining for the second year in a row. The last time this fuel registered back-to-back declines was in the early 1980s, the API report noted, and there is little indication yet of revival of air passenger demand.

Distillate fuel oil demand in 2002 declined for the first time in more than a decade, down 2.2%. An uncharacteristically mild winter in 2001-02 contributed to that decline, especially in the first quarter when demand fell 10.6% compared with the previous year.

Residual fuel demand in 2002 was down 21.2% at 639,000 b/d, the lowest in more than 30 years. Residual fuel oil has been on the decline partly because of price competition with natural gas in the industrial and utility sectors, said API's report.

Commercial petroleum inventories in 2002 declined by more than 100 million bbl, the biggest drop since 1999, the report said. Crude oil accounted for one third of the decline, leaving 276.1 million bbl in reserve, more than 11% below levels of a year ago and the lowest yearend level since 1975.

The report cited several factors: the Venezuelan strike in December, rapidly rising spot market prices, and lower future market prices, all raising the costs and risks of holding stocks.

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Rising crude oil prices that stem from geopolitical events, possible war in Iraq among them, caused the US benchmark crude, West Texas Intermediate, to reach nearly $33/bbl by yearend, 80% higher than its low point at the beginning of 2002. Natural gas prices also rose 80% over the year, said API.

Refinery processing was down 1.4% compared with the year before, reflecting weak demand.

Natural gas liquids production increased 1.3% over 2001.

Crude oil production in Alaska increased 5%, while production in the Lower 48 dipped by 0.2%.