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Friday, December 15, 2017

U.S. petroleum supply and demand

Much focus has been placed recently on oil imports to China and their importance to the tanker market. However, China represents ‘only’ about 8% of the tanker market while the U.S. still actually represents some 20-25%.  

According to the U.S. Energy Information Administration's (EIA’s) latest short-term outlook, U.S. oil demand in 2007 will be 21.48 mbd, 4.25 mbd higher than 15 years ago. The average yearly increase over this period has been 0.3 mbd, while the increases 2005 to 2006 and 2006 to 2007 are expected to be 0.4 and 0.5 mbd respectively.  

U.S. oil production over the 15-year period has declined by 1.22 mbd, but is expected to recover from 5.1 mbd in 2005 to 5.63 mbd in 2007, 0.2 mbd above the 2004 level. The general trend of falling oil production and increasing demand has naturally caused increased imports of both crude oil and products. The latest forecasts for net petroleum imports show an increase by 0.27 mbd in 2005, but then a marginal fall in 2006 of 0.05 mbd.

Source EIA (Energy Information Administration/Short-Term Energy Outlook -- February 2006). 

The overall increase in U.S. oil demand has nevertheless varied strongly from year to year, and was actually negative in both 2001 and 2005. One of the main reasons for the increase in U.S. oil demand has been the annual increase in population of some 2.5 million. 

Year

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

USA

0.01

0.58

0.31

0.30

0.60

0.18

-0.05

0.11

0.27

0.70

-0.06

0.35

China

0.24

0.28

0.26

0.11

0.37

0.57

0.05

0.30

0.55

0.86

0.20

0.40

Rest world

1.05

1.03

1.23

0.29

0.63

-0.15

0.71

0.19

0.72

1.38

1.06

0.90

Total

1.30

1.90

1.80

0.70

1.60

0.60

0.70

0.60

1.54

2.94

1.20

1.65

U.S. crude oil imports at the start of 2006 were running at 9.9 mbd, slightly below the level at the beginning of 2005. The commercial stock level was 9% above last year's level and 8% above the average over the last 3 years. Oil production was standing at some 5.0 mbd, which is 0.4 mbd below the level for the first 5 weeks of 2005. 

U.S. gasoline imports at the start of 2006 were 1.1 mbd, 28% above the level at the beginning of 2005. The commercial stock level was 3% above last year's level and 9% above the average over the last 3 years. Gasoline imports were 0.35 mbd in 1994, 0.53 mbd in 1999 and 0.89 mbd in 2004. 

U.S. distillate imports at the start of 2006 were 0.48 mbd, 44% above the level at the beginning of 2005. The commercial stock level was 17% above last year's level and 15% above the average over the last 3 years. 

The U.S. President’s State of the Nation speech created a stir in the energy world. George W. Bush runs the risk of alienating the world’s biggest source of oil with his plan to end America’s “oil addiction”, OPEC delegates, oil ministers, energy experts and even some environmentalists said at the meeting in Vienna 2 February. The President’s plan to cut U.S. consumption of Middle East oil by 75 per cent by 2025. is unlikely to be achievable and could be detrimental to investment in the industry. 

Of course, the oil market is international and the price is decided globally. In a free market, irrespective of where a country takes its oil imports from, the oil price will be subject to the same market forces. Even if America doesn’t import a drop of Middle Eastern oil, the Middle East countries will still play an important role in determining the price of oil. In November 2005 the U.S. took 16% of its oil imports from the Middle East countries, 38% from OPEC, 17% from Canada, 13% from Mexico and 5% from Angola, which means that the U.S. has in fact already diversified its sources of oil imports. As a comparison Japan took 90% of its oil from the Middle East in 2005.  

Contact: Erik Ranheim