While U.S. drivers continue to cut back at the pump, refiners are increasingly sending more gasoline and diesel fuel overseas, making the U.S. a net exporter of refined products for the first time in more than a half century.
“This has been the trend all year,” said oil analyst John Kilduff of Again Capital. “There’s been consistently poor demand (by consumers) all year.”
The EIA Thursday reported that U.S. crude demand was down 2.2 percent in October, from a year ago.
Andrew Lipow, president of Lipow Oil Associates, said the EIA October data revealed other important trends. One is that there was another big drop in consumer gasoline demand, even as prices at the pump came off the summer highs. The other is that the U.S. increasingly exporting refined products, led by distillates.
Unlike gasoline, distillates demand is in fact rising domestically and the refining industry is producing record amounts, he said. Distillates include diesel fuel, jet fuel and home heating oil.
“Gasoline demand is down 4.4 percent for October of this year versus last year, and conversely they are showing distillate demand is up 4.5 percent,” Lipow said. Distillate demand is rising in large part because of the use of diesel fuels by the transportation industry.
Lipow said the numbers show that the U.S. exported 1.07 million barrels a day of distillates, which includes diesel fuel, double the 557,000 barrels two years ago and up from last year’s 870,000 barrels.
Gasoline exports have also grown to the point where they are getting close to equaling the amount of imports. The number of exports totaled 562,000 barrels a day, compared to imports of 596,000.
For all refined petroleum products, the U.S. in the first 10 months of 2011 exported 848 million barrels and imported 750 million. Lipow said he believes this if the first time since World War II that the U.S. will be a net exporter of refined petroleum products, but government data on the EIA website only goes back to 1973.
Even with its ability to export, the U.S. refining industry is not operating at peak capacity. It is currently running at a rate of 84.7 percent, but the picture for the industry could also change in coming months as the east coast continues to see refineries shut down. Two big closures are pending in the Mid-Atlantic for 2012.
“One reason the U.S. is exporting more gasoline is that ethanol has contributed more fuel supply so refineries have a surplus of gasoline made strictly from crude oil,” Lipow said.
Some of the reduction in gasoline demand could be coming from conservation and more efficient engines.
Interestingly, the U.S. in October exported nearly 10 percent, or 93,000 barrels a day of its ethanol, which was being produced at a near-record level of 906,000 barrels a day. One country receiving some of those imports was Brazil, a leading producer and consumer of ethanol.
Kilduff said the drop in consumer gasoline consumption is a longer term trend but the continued decline is worrisome and reflects a weak economy. “Even (the weekly report) which should have captured the holiday driving season was showing 8.6 million barrels (gasoline consumed), which is low for this time of year,” he said.
Lipow said he does not anticipate gasoline prices will keep dropping, but he said the price at the pump may be more directly influenced by the price of crude oil in the coming year.
“They’ve (refiners) satisfied demand and exported the balance. It’s all going to depend on the crude price because in 2012, you have declining demand and adequate refined supply,” he said.
“Especially in 2012 to watch, you can imagine that the exports of distillates is going to be a political issue. We’re even exporting ethanol fuels,” he said.
Gasoline prices currently average $3.26 a gallon nationally, according to AAA. In July, regular unleaded gasoline hit an average high of $4.114 and was at $3.071 at this time last year.
Diesel fuel hit a high of $4.845 this summer and is now averaging $3.824 — well above the price at this time last year of $3.315 per gallon.
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