Jun 28, 2011

World Energy Outlook-continued

How much gasoline does America burn? It's a critical question for oil companies, economists, investors and OPEC, among others. Problem is the data are a little slippery.
Most Wednesdays, the government's Energy Information Administration provides weekly estimates of petroleum product inventories and shipments. In essence, the EIA takes refinery output, adds imports and stock draws and subtracts exports and stock additions to calculate an implied "product supplied" total. Every month, with a time lag, the EIA refines these data for publication in its Petroleum Supply Monthly report. The market tends to focus on this series.

The EIA also compiles another series published in Petroleum Marketing Monthly. This is based on state-level data from so-called "prime suppliers" which produce, import or transport wholesale petroleum products to local distributors and some end-users. It is the closest set of data to the actual gasoline nozzle you put in your vehicle.

A gap between the two monthly series has been growing since the start of the last decade, when they were roughly equal. Today, the supply data indicate gasoline consumption is almost 400,000 barrels per day higher than that suggested by the prime supplier series. Put another way, the supply data indicate gasoline demand is roughly tracking early 2004 levels but the marketing data indicate demand is back to where it was in early 2002.

Counting all the gallons burned across the U.S. isn't an exact science, so some discrepancy is understandable. The EIA points out, for example, that blending of additives into fuels occurs at different places in the supply chain and this has changed over time, leading to some volumes showing up in one report but not the other. Some imports may also not show up in the prime supplier data, the EIA says.
[GASHERD chart]
The added twist is that the Bureau of Economic Analysis, which compiles the national accounts, uses a mixture of data from the EIA, the Bureau of Labor Statistics and the Federal Highway Administration to estimate how much consumers spend on gasoline. These numbers track more closely with the EIA's marketing series. Based on a three month rolling average, U.S. consumers spent $257 billion on motor fuels in real terms in March. These data suggest real consumer spending on motor fuel hasn't gone anywhere since late 2008 and is stuck at levels that prevailed in 2001, when nominal gasoline prices were much lower.

Models of world oil consumption, relying on numbers from a host of countries with varying data quality, must factor in these different pictures of demand. And that 400,000 barrels-per-day gap equates to about 30% of the International Energy Agency's estimate of global oil demand growth this year.

Of particular note is that the BEA series suggests that the last gasoline price spike and subsequent recession may have inflicted structural demand destruction. Energy economist Phil Verleger points out that, even as consumer spending has recovered in real terms, spending on motor fuel hasn't, suggesting Americans are finding ways to limit their use. He points also to California state data showing taxable motor fuel volume collapsed in 2008 to 2001 levels, where it remains stuck.

Oil swings on everything from a weekly inventories number—that usually gets revised—to Goldman Sachs's latest oracular pronouncement on prices. The underlying fundamental picture of supply and demand, however, demands a closer look.

Write to Liam Denning at liam.denning@wsj.com

Please go to the website below and read the 2010 World Energy Outlook graphs at the bottom of this homepage.
There is a demonstration that reduced carbon output driven by a switch to more alternative(than oil and gas that is)fuels can assist in the demand degradation of oil and gas over the next 20 years


Conservastore believes in a tonic of fuel supply for the world. Nuclear, wind, solar, tidal, bioenergy must all be coupled with oil and gas to provide what the world needs to power itself. The more equally split this tonic is the happier humans on the Earth will be since they will pay a fairer price to power their world.
Read more at www.conservastore.com

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