The US currently consumes about 20.5 million b/d of petroleum and produces about 8.5 million b/d, including natural gas liquids and processing gains. Its remaining supply is provided via imports of crude oil and petroleum products plus about 700,000 b/d of ethanol.
However, ethanol is not petroleum, and it presents some unique challenges to the transportation fuels division of the industry. It is relatively more expensive to transport as it has no access to the US products pipeline network, operates at two thirds the btu value of conventional gasoline, and consumes substantial volumes of transportation fuels in the production of its main feedstock, corn.
Rising world demand for transportation fuels, particularly middle distillates, have grown at a much faster rate than additions to refinery capacity. The world refining industry, therefore, is operating at very low levels of excess capacity; furthermore, existing capacity is not well matched to the recent high growth in demand for middle distillates. This creates an environment producing periodic spikes in the price of transportation fuels. For example, US refining capacity is 4 million b/d below effective available capacity (3 million b/d below nameplate capacity). As a result, the US must import diesel fuel and gasoline components—historically 10% of consumption—from foreign refineries.
Middle distillates, including diesel fuel, have been growing at much higher rates than gasoline. Until new worldwide refining capacity is added to improve the output of middle distillates, the world can expect to continue facing a market where gasoline remains heavily discounted to diesel fuel.
Although both gasoline and diesel prices are very high, the price of gasoline has been attenuated by the large volumes of coproduced gasoline components on the world oil market. As European and Asian refining centers attempt to maximize output of middle distillates, they have no choice but to also produce gasoline components which are often sold into the US market.
The decline in the value of the US dollar also has increased the cost of imports, but EPRINC is reluctant to speculate whether there is a direct causal relationship between the two. This is a complex and esoteric issue involving trade flows and monetary policy which is better addressed by analysts other than EPRINC.
