U.S. 1990 OIL DEMAND SHOWS RARE DECLINE

Petroleum deliveries to U.S. consumers declined in 1990 for the first time in 7 years, the American Petroleum Institute reports. Deliveries averaged 16.96 million b/d, down 2.1% from 17.325 million b/d in 1989 ' As a result, total oil and products imports slipped slightly after rising more than 60% during 1985-89. Imports were 7.957 million b/d, compared with 8.004 million b/d in 1989. U.S. crude production dropped to its lowest level since the early 1960s, although the rate of decline

Jan. 21, 1991

5 min read

Petroleum deliveries to U.S. consumers declined in 1990 for the first time in 7 years, the American Petroleum Institute reports.

Deliveries averaged 16.96 million b/d, down 2.1% from 17.325 million b/d in 1989 ' As a result, total oil and products imports slipped slightly after rising more than 60% during 1985-89. Imports were 7.957 million b/d, compared with 8.004 million b/d in 1989.

U.S. crude production dropped to its lowest level since the early 1960s, although the rate of decline slowed. Production averaged 7.2 million b/d, down 5.1% from 1989.

API Pres. Charles DiBona said supplies are at normal levels and there should be adequate supplies in the event of hostilities in the Middle East. "There is no need to panic."

He said the fact that the world has not experienced a major shortage despite a sudden loss of 4.3 million b/d of Iraqi and Kuwaiti production to a United Nations embargo "supports the principle that letting the market allocate supplies and encourage conservation, rather than trying government controls and intervention, is the best method of coping with a crisis such as the one we are facing."

OVERVIEW

API said petroleum deliveries, which had been nearly flat in 1989, slipped in 1990 due to higher crude and product prices following Iraq's Aug. 2 invasion of Kuwait, a slowing economy, and mild weather in the first and fourth quarters.

The drop late in the year was steeper than at the year's outset. During the first 7 months of 1990, deliveries fell 1.4% in a year to year comparison.

By the fourth quarter, the decline in deliveries had accelerated to 5.4%--but closer to an estimated 2.5% if adjusted for weather. The decline for the year as a whole, if adjusted for weather, would have been about 1 %.

A 389,000 b/d drop put 1990 U.S. crude production at the lowest level since 1961, although the slide was less than the previous year's record decline of more than 500,000 b/d. Alaskan production, which had been trending downward at about 100,000 b/d/year, experienced an upturn in the fall as a result of efforts to boost production and delay the natural decline on the North Slope.

In October, before the weather and other problems curbed production late in the year, Alaskan production slightly exceeded its 1989 level. Production in the Lower 48, which had dropped about 385,000 b/d in 1989, fell less rapidly--by about 300,000 b/d--in 1990 as oil field activity increased during the year.

API pegged total imports as a percent of domestic deliveries at 46.9%, up slightly from 1989. Imports' share of deliveries in the past 2 years has been second only to record high of 47.7% reached in 1977. Although imports dropped from 8.5 million b/d in the first 7 months of the year to 7.3 million b/d in the remainder of 1990, most of this was a reflection of inventory behavior, API said.

Without the substantial rise in inventories during the first part of the year and the more than 600,000 b/d drawdown since the end of July, imports would have averaged 7.9 million b/d in both periods.

PRODUCTS CONSUMPTION

API said the only fuel, among major petroleum products, to experience continued strong increases in demand throughout 1990 was kerosine jet fuel, with a 2.3 % growth.

Ed Murphy, AP[ director of finance, accounting, and statistics, said, "Once we adjust for the anomaly of December 1989, when substantial amounts of jet fuel were needed for blending with heating fuels, we estimate jet fuel consumption grew at a rate of 3.5% in 1990.

"Surprisingly, and in contrast to other fuels, this rate of growth did not diminish in the latter part of the year."

He explained that airline travel grew an estimated 5% last year and the military buildup resulted in stronger military jet fuel demand--up to 200,000 b/d more worldwide in September vs. July. Military demand has dropped in recent months to slightly more than 100,000 b/d.

U.S. gasoline deliveries dropped 1.7%, compared with 1989. The decline last December was 5.2%. API noted retail prices of gasoline, excluding taxes, ended the year about 15/gal higher than preinvasion levels.

Distillate deliveries dropped 3.4%, the first such decline in 8 years. Residual fuel oil deliveries were down 10.6% to 1.225 million b/d, their second lowest level in nearly 50 years.

API said overall refinery activity slackened toward the end of the year in response to weakening demand. But production of kerosine jet fuel in the fourth quarter rose nearly 12% from the year ago period, reaching a record quarterly high of 1.4 million b/d.

At yearend, inventories of crude and products stood at 1,027,500,000 bbl, compared with 1,001,600,000 bbl at the end of 1989. Petroleum remained the nation's main energy source in 1990 with 41.4% of the market. Natural gas had 23.8%, coal 23.3%, and nuclear 7.7%.