Alex Mills
By Alex Mills
Crude oil inventories in the U.S. increase last week creating a decrease in oil prices. Meanwhile, gasoline stocks decreased as travelers took to the highways, and for the first time in nine years diesel fuel prices averaged less than gasoline prices.
Oil inventories finished above the five -year seasonal average, and oil prices dropped to $49 per barrel. Crude inventories rose 2.5 million barrels in the week to July 17th to 463.89 million barrels, more than 100 million barrels above the five-year seasonal average for this week, according to the Energy Information Administration (EIA).
The Gulf Coast region was responsible for the crude build, with stocks rising 2.5 million barrels. The only drop was on the West Coast, where inventories fell by 762,000 barrels.
Crude stocks at Cushing, Oklahoma, rose by 813,000 barrels, the EIA said.
Refinery crude runs rose 45,000 barrels per day (bpd), EIA data showed. Refinery utilization rates rose by 0.2 percentage point at 95.5% of total capacity.
Gasoline stocks fell 1.7 million barrels, and gasoline demand rose 345,000 bpd to 9.7 million bpd, the second highest level since EIA records were available in 1991.
The Federal Highway Administration has released data showing that US drivers have traveled the most miles on record during the first five months of the year.
EIA also reported that the U.S. average diesel fuel retail price fell below the average regular gasoline retail price for the first time since the week of August 10, 2009. From August 2009 through June of this year, retail diesel fuel sold at an average premium of 34 cents per gallon over regular grade gasoline, with the difference reaching more than 90 cents per gallon in January.
Diesel prices were higher until last week because of the higher production cost of ultra-low diesel that was phased in between 2006 and 2010. Also, diesel has a federal tax that is six cents per gallon more than gasoline.
EIA said gasoline and diesel have opposite seasonal demand patterns: gasoline demand tends to peak in the summer driving months, while diesel demand generally peaks in the winter heating months. Since January, gasoline demand growth has been unusually strong both in the United States and abroad.
Tight diesel markets over the past six years have reflected growing diesel demand from developing economies and the switchover to ultra-low sulfur diesel for home heating oil in northeastern states, where more than 80 percent of U.S. use of oil for space heating occurs. Over the same period, gasoline demand has generally been weak, reflecting increasing vehicle fuel economy and changing consumer driving patterns.
U.S. Senate Energy and Natural Resources Committee Chairwoman Lisa Murkowski and ranking minority member Maria Cantwell announced agreement on energy legislation last week that will promote energy efficiency, but did nothing to help the remove the oversupply of crude oil in the U.S.
The committee leadership said that the committee will begin debate on July 28th and may vote on later in the week before the Senate adjourns for its tradition August recess.
The legislation contains provisions to promote energy conservation, speed action on applications to export natural gas and asserts that the nation’s stockpile of petroleum in the Strategic Petroleum Reserve should be kept for emergencies.
The repeal of the ban on the export of crude oil probably will be left out of this bill, because Cantwell believes the issued need more study.
Alex Mills is President of the Texas Alliance of Energy Producers. The opinions expressed are solely of the author.
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