Nick Snow
Washington Correspondent
WASHINGTON, DC, July 19 -- US gasoline production and demand broke records during this year's first half despite higher prices and several unplanned refinery breakdowns, the American Petroleum Institute reported on July 18.
Gasoline production rose 3.4% year-to-year to an average 8.9 million b/d during the period, API said in its latest monthly statistical review. Gasoline imports, which had lagged during this year's first 3 months, rebounded to a record average of 1.3 million b/d during the second quarter, it indicated.
Higher imports aided total gasoline deliveries—which API uses to measure demand—to climb 1.5% to an average of 9.2 million b/d from 9.1 million b/d during the first half of 2006, API said. June's gasoline production hit a record monthly peak of 9.3 million b/d, helping to push the month's total gasoline deliveries 3.7% higher year-to-year to an average of nearly 9.8 million b/d from 9.4 million b/d a year earlier.
Demand for other products also broke first-half records. Distillate fuel oil demand climbed 1.9% year-to-year to an average 4.3 million b/d as deliveries of ultralow-sulfur diesel climbed 9.1% to an average of 3.3 million b/d. "The industry produced record amounts of products despite unplanned refinery outages. Overall, US petroleum deliveries were up 1.3% in the first half compared to a year ago," Ronald J. Planting, API statistics manager, told reporters during a teleconference.
Refining activity
Domestic refinery activity during the first half, as measured by input to crude distillation units, decreased 0.4% year-to-year to an average of 15.3 million b/d from nearly 15.4 million b/d during the first half of last year. API traced this to lower input levels during May and a counter-seasonal drop in June. The capacity utilization rate declined 1.1% to 87.6% as total operable capacity rose 0.8% to 17.5 million b/d.
API chief economist John C. Felmy said scheduled and unplanned refinery outages were higher than normal during this year's first half. "The planned outages were for operating reasons. But there is evidence that some of the unplanned shutdowns may have been a result of strain that was put on the system from reducing sulfur levels for ultralow-sulfur diesel," he said.
Tighter supplies initially increased gasoline prices, which dampened demand early in the second quarter, he continued. By June, however, lower prices helped restore demand as summer driving season got under way.
Felmy said gasoline prices overall rose during the first half but not enough to significantly affect demand. "For the year-to-date, retail gasoline prices averaged $2.70/gal. A year ago, they were $2.62[/gal], about 8¢ lower. That small a difference is not inconsistent with seeing an overall growth in demand for gasoline due to improved incomes and other factors. A 3% increase in price, all other things being equal, would only result in a 0.3% decrease in demand, which could easily be offset by the economy and demographics," Flemy said.
Upstream, domestic crude and condensate production in the first half grew 1.3% to 5.2 million b/d as production of natural gas liquids increased 0.5% to an average of 1.7 million b/d. Production increases in the Gulf of Mexico offset a 5.2% decline in Alaska, API said.
Contact Nick Snow at [email protected].