API: US demand grows, but policies may stymie production

Stronger US petroleum deliveries for all of 2010 as well as December reflected a growing US economic recovery, the American Petroleum Institute said.

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Jan. 21 -- Stronger US petroleum deliveries for all of 2010 as well as December reflected a growing US economic recovery, the American Petroleum Institute said. But its chief economist warned that Obama administration policies could restrict growth of US crude oil production to help meet higher US demand in the future.

“We continue to try to improve production, but there are challenges going forward,” John C. Felmy said in a Jan. 21 teleconference. “There was the Gulf of Mexico moratorium, and now there’s what is called the ‘permitorium.’ We’ve seen permits retracted and not moved forward onshore, which is disappointing because we have some bright prospects, particularly in North Dakota’s Bakken formation. We’ve also seen onshore natural gas prospects threatened by potential regulatory change, particularly involving hydraulic fracturing. We should have a good thorough discussion of what we can do to increase our production instead.”

US oil production rose by 1.3% in December to an average 5.52 million b/d from 5.45 million b/d a year earlier, according to API. Full-year production averaged 5.49 million b/d in 2010 compared with 5.36 million b/d in 2009. Production continued to grow year-to-year during December in the Lower-48 to an average 4.87 million b/d, 1.4% more than a year earlier, as it declined in Alaska to about 652,000 b/d, lower than December 2009’s 655,000 b/d average.

“There’s a vast amount of oil to be produced in this country,” Felmy told reporters. “In the next 2 years, we could start moving forward and get ready for the following 10 years. We can move forward by approving permits, opening up exploration, and taking other positive steps. We have in excess of 116 billion bbl of oil in the United States. We have a lot of opportunities.”

Proper government policies could lead to substantial US oil development, which would produce jobs, generate revenue for the government, and improve the US economy as well as its crude supply situation, Felmy said. “The administration’s policies so far have been focused on renewables, and most of that has involved electricity. Crude oil markets are a worldwide phenomenon, and the US should be concentrating on producing more of its own resources,” he said.

Higher demand
Product deliveries, which API uses to measure demand, were up 1.2% year-to-year to an average 19.47 million b/d in December, its latest statistics showed. Their 19.2 million b/d average for all of 2010 was 2.3% higher than 2009’s full-year average, API’s figures indicated.

Both gasoline and diesel fuel deliveries were higher for 2010 over 2009, gasoline by 0.6% to 9.05 million b/d and distillates by 4.8% to 3.81 million b/d, according to API. Also, US refiners set a record for annual gasoline production at an average 9.11 million b/d, it said.

“The robust distillate numbers suggest the nation’s industrial sector continues to rebound,” Felmy said. “They were up both month-over-month and year-over-year. While consumer demand for gasoline was weak during this winter holiday season, higher prices and bad weather might have kept people off the roads,” he said.

Felmy continued, “The other side of that is overall retail sales were up, led by a big 12% increase in e-commerce sales. People were doing more shopping online, and that, in turn, spurred more truck shipping and an increase in deliveries of ultralow-sulfur diesel—a subset of total distillates and the kind of fuel the on-road trucks use—by more than 16% this December over last.”

API said December’s oil and product imports, at 10.61 million b/d, were down from November but slightly up from December 2009’s 10.52 million b/d, driven by increases in crude imports. Crude imports at 8.82 million b/d were 8.1% higher year-to-year while total product imports, at 1.79 million b/d, were 24.3% lower.

US crude stocks totaling 332.2 million bbl at the end of December had steep yet seasonal declines, down by 6.5% from Nov. 30 but up by 2.2% from Dec. 31, 2009. They also were at their highest level since the end of December 1994. Inventories of all products declined in December from their levels at the end of November, with motor gasoline stocks falling 1.3% while distillate stocks were 0.4% lower, API said.

Contact Nick Snow at nicks@pennwell.com.

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