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Peak Demand? No, A New Gasoline Demand Record

Peak Demand? No, A New Gasoline Demand Record thumbnail

Given all the media hype about peak oil demand — which is supposed to come about largely as a result of the explosive growth of electric vehicles (EVs) — you might be forgiven for missing the news that U.S. gasoline demand just hit a new all-time high. This new demand record comes despite EV sales that tripled in the U.S. from 2012 to 2016.

My news feed tends to be dominated by headlines like Goldman Sachs warns of peak oil demand by 2020 (even though that headline doesn’t accurately reflect what the article said). But do the facts contradict the narrative? Sensationalism dominates the news, and the idea that oil demand will begin to decline shortly is definitely sensationalistic. I believe that this is one reason oil prices remain depressed because it perpetuates expectations that oil’s days will soon be at an end.

Every Wednesday the Energy Information Administration (EIA) releases its Weekly Petroleum Status Report. Last week’s report noted that Finished Motor Gasoline supplied in the U.S. for the week ending 7/28/17 was 9.842 million barrels per day (BPD). That is a record, and not just seasonally. Last week’s gasoline demand was the highest weekly U.S. gasoline consumption on record. The top four weekly gasoline consumption numbers on record have all occurred in 2017 — not exactly what one might expect given all of the “peak demand” articles that are all the rage.

Not only are we using record amounts of gasoline in the U.S., but refiners are also exporting record amounts of crude oil and finished products — more than 3 million BPD (even though the U.S. is still a net importer of crude oil). And just to be clear, the gasoline consumption numbers reported above do not include gasoline that is exported. The EIA specifically notes:

Product supplied: In general, product supplied of each product in any given period is computed as follows: field production, plus refinery production, plus imports, plus unaccounted-for crude oil (plus net receipts when calculated on a PAD District basis) minus stock change, minus crude oil losses, minus refinery inputs, and minus exports.

California is responsible for nearly half of all EV sales, with explosive growth in recent years. You might expect to at least see a decline in gasoline demand there. But gasoline demand in California has climbed each year since 2013 and is on track to rise again this year. Since 2013, gasoline demand in California has grown by 850 million gallons (~6%).

The reason gasoline consumption continues to increase despite the rapid growth of EVs is that the population continues to grow. I believe that this variable is generally missed by those calling for a short-term peak in oil demand. The problem is more complex than “More EVs = less oil consumption”, but that’s how it’s being treated by some analysts. Thus, as a result of this glaring blind spot, it should come as no surprise that gasoline demand trends don’t match the narrative that is being constructed.

Forbes



19 Comments on "Peak Demand? No, A New Gasoline Demand Record"

  1. rockman on Mon, 7th Aug 2017 9:38 am 

    “The reason gasoline consumption continues to increase despite the rapid growth of EVs is that the population continues to grow”. No it’s not. The reason is that there are 30 million registered ICE’s in CA compared to only 245,000 EV’s sold in CA from 2011 thru 2016.

    And CA has 50% of the EV’s in the US.

    https://cleantechnica.com/2017/01/20/december-2016-us-ev-sales-2011-2016-sales-figures-state-ev-volumes/

  2. Cloggie on Mon, 7th Aug 2017 9:59 am 

    Another slap in the face for Richard “the party is over” Heinberg.

    https://images-na.ssl-images-amazon.com/images/I/51-fM7skMkL._SX331_BO1,204,203,200_.jpg

    For some reason, the book is no longer for sale.lol

  3. Apneaman on Mon, 7th Aug 2017 11:04 am 

    “Given all the media hype about peak oil demand…”

    Oh hell ya. Peak oil demand has been the lead story on MSM for 5 years running now. It all they ever talk about. The entire global media just won’t stop talking about ‘peak oil demand’ 24/7. Gimme a fucking break. Except for a tiny teeny clique of barrel counting retards, no one even knows what peak oil is and even if they heard about it once it was immediate run through their brain filters and discarded to make room for celebrity tweets. Let’s try not to impress yourself with all this self importance.

  4. dave thompson on Mon, 7th Aug 2017 11:37 am 

    Whatever the amount of FF production, refinement and delivery to the market.
    It is all eventually burned.

  5. Apneaman on Mon, 7th Aug 2017 11:50 am 

    Any industry that operates under highly favorable socialist benefits should be doing well. They would not exist, or be a shadow of themselves, if not for all the taxpayer subsidies – same as most industries.

    Fossil fuel subsidies are a staggering $5 tn per year

    A new study finds 6.5% of global GDP goes to subsidizing dirty fossil fuels

    “The authors work at the IMF and are well-skilled to quantify the subsidies discussed in the paper.

    Let’s give the final numbers and then back up to dig into the details. The subsidies were $4.9 tn in 2013 and they rose to $5.3 tn just two years later.”

    https://www.theguardian.com/environment/climate-consensus-97-per-cent/2017/aug/07/fossil-fuel-subsidies-are-a-staggering-5-tn-per-year

    How Large Are Global Fossil Fuel Subsidies?

    http://www.sciencedirect.com/science/article/pii/S0305750X16304867

    Que the fossil fuel cheerleaders and disciples of capitalism with their apologetics, 1001 rationalizations why it don’t count and change of direction by pointing out solar subsidies (as if that cancels out fossil fuel’s).

    Face it losers, capitalism is a story that you ‘believe’ and defend because they got to you when you were young. It’s part of your tribal make up. The dog eat dog, only the strong survive story is complete bullshit. Add up the subsidies and bailout to highly profitable industries is all it takes to burst that bubble. It’s selective socialism is what it is…..and a religion for slaves.

  6. MASTERMIND on Mon, 7th Aug 2017 12:14 pm 

    People don’t want the truth. They want to feel happy. Imagine if the MSM were to run front page stories about how shale is a joke — how conventional oil is well past peak — how solar is nonsense — how EV’s are bullshit… how we shredded Iraq and Libya and Syria so that we could keep BAU alive and continue to live large for a few more years….This would cause mass hysteria. So since nobody wants truths — and giving them truths would only end badly for all involved… might as well use the MSM to keep the sheeple under control and entertained. See everybody wins! The public get their puff of hopium, the MSM owners get their shot of influence and wealth, and politics get their PR department for free, and doomsters get their laughs and (like everybody else) a few more years of life.

  7. peaktard on Mon, 7th Aug 2017 12:23 pm 

    my dearest aptard. i don’t like either system. it’s a game for elites. at best, i come to the poll and pull the lever.

    thanks for the info on subsidy. all this just for the upkeep of old invention and investment in ICE because FF/oil was found to be a portable/dense source of power.

    I see now. I see some benefit to taking some of that subsidy and allocating to elecric vehicles.

  8. peaktard on Mon, 7th Aug 2017 12:29 pm 

    socialsm is very bad though. it means everyone pools resources like worker bees and the alpha apex predators just go to the oasis to feed.

    capitalism means thy have to work for it. it only takes slight more work.

  9. Kenz300 on Mon, 7th Aug 2017 1:29 pm 

    Forbes — spokesman for the fossil fuel industry.

    Fossil fuels are the past.

    Energy production with Wind and solar are the future.

    Energy consumption with electric vehicles continues to grow.

    Climate Change will be the defining issue of our lives.

    Future generations will pay for our mistakes.

  10. bobinget on Mon, 7th Aug 2017 2:45 pm 

    Look hard at fracking sand. A recent CHK gas well used 8 million pounds of the stuff.
    The following pertains more to gas than oil.

    The Permian basin is starting to see decline rates from shale wells accelerate, a trend that could be the result of too much drilling.

    Shale wells suffer from steep decline rates. A rush of output occurs at first, but almost immediately after the well comes online, the flow rate drops off precipitously. And within just a few months the well is a shadow of its former self. That is typical.

    But putting a bunch of wells close to each other can induce even steeper decline rates than normal because they can rob pressure from each other. If that occurs, the wells can suffer irreparable damage, and ultimately, the volume of oil and gas that can eventually be recovered could potentially be permanently diminished.

    Such a scenario appears to be playing out in the U.S. shale patch, with the white-hot Permian, in particular, falling victim to what is a byproduct of such a massive boom in activity. Bloomberg reports that the decline rate from “legacy” wells – those already online – is accelerating rapidly, the consequence of over-drilling in certain areas.

    In fact, the legacy decline rate in the Permian has accelerated from around 100,000 bpd month-on-month in 2015 and 2016, to a month-on-month decline of 154,000 bpd most recently. In other words, the Permian will see legacy wells lose 154,000 bpd from July to August, which means that shale drillers will have to drill at least as much just to stay flat. The EIA projects that the industry will add 218,000 bpd of new gross supply in the Permian in August, leading to a net gain of 64,000 bpd.

    Other shale basins are seeing their decline rates rise as well. The Eagle Ford’s legacy decline rate has jumped from 80,000 bpd a few months ago to 136,000 bpd in August.

    Of course, legacy decline rates always increase when more shale wells come online. It’s just a numbers game. More wells in production means that there are more wells that will enter into decline. In that sense, the higher rates overall decline in the U.S. shale patch are predictable and understandable.

    But a new report from Horseman Capital Management Ltd., and cited by Bloomberg, says the decline rates are deeper than usual because drillers are placing too many wells in close proximity to one another. The wells then kill pressure in each other, lowering the amount of oil that can be recovered from them. “New well production is increasingly cannibalizing legacy production,” Russell Clark, investment manager at Horseman Capital Management, wrote in a new report, cited by Bloomberg. “The decline rate looks to be accelerating.”

    Shale companies often trumpet their ability to tweak their drilling practices in order to cut costs, boasting about “drilling efficiencies” that have allowed them to lower their breakeven prices over the last three years. But one of those practices is putting so many wells close together, a practice that was thought to squeeze more oil out of the ground at lower cost. However, while the costs might indeed remain low, this new evidence suggests that cramming wells close too close together could be eating into their own potential production levels.

    More evidence of trouble in the Permian came from the quarterly data from Pioneer Natural Resources, considered one of the top drillers in the Permian. Pioneer reported higher natural gas-to-oil ratios in its production than it expected. As oil fields age, Reuters reports, they tend to produce relatively more gas than oil. Pioneer’s surprise at the higher gas coming from its wells raised some alarm from investors, who questioned company executives on a conference call about falling well pressure. Pioneer’s management tried to assuage investors by saying that the higher gas-to-oil ratio has more to do with simply more gas coming out of the ground, rather than less oil. In other words, they say, there’s nothing to see here.

    Perhaps. But the legacy decline rates are accelerating at a dizzying pace. Across the top shale basins in the country, including the Permian, Eagle Ford, Bakken, Haynesville, Marcelles, Niobrara and Utica shales, the oil legacy decline rate has hit 350,000 bpd. Again, that means, from July to August, those basins lost 350,000 bpd of production. Of course, the rate of drilling is so aggressive that the industry still added 113,000 bpd of production on net, but it took a lot of new wells to more than offset the decline.

    Shale output is still on an upward trend, but if the industry can’t keep up on this accelerating treadmill, the legacy decline rates will catch up to them.

    By Nick Cunningham – Aug 06, 2017, 6:00 PM CDT

  11. bobinget on Mon, 7th Aug 2017 2:52 pm 

    Natural gas is a fossil fuel as are a dozen other exotic gases we depend on.

    Neither coal or oil are gases in their solid state.

    Make comments clear.

  12. twocats on Mon, 7th Aug 2017 4:15 pm 

    http://www.zerohedge.com/news/2013-04-06/these-charts-better-not-represent-true-state-us-economy?page=2

    party’s over —- delayed due to economic meltdown and uptick in hybrids. huge transfer of btus from west to east from 2007 to 2017. can that trend be duplicated for another decade? Seriously doubt it. as mastermind points out – had to move heaven and earth just to get us to here. let’s see what happens at the next energy / financial step-down.

  13. boat on Mon, 7th Aug 2017 6:39 pm 

    Doomer boys and girls,

    How many wells are drilled and waiting to be fracked? What is the Premain bpd well average. compared to 4 years ago. How much growth in oil by month for the last 5 month. If you can’t answer those questions you know little about US oil..

  14. twocats on Mon, 7th Aug 2017 7:41 pm 

    not even close to awesome. we have a long way to go to get to 2015.

    https://shaleprofile.com/index.php/2017/07/11/us-update-through-march-2017/

    and after two years, 2003 remains the best performing shale oil wells.

    https://shaleprofile.com/index.php/2017/07/11/us-update-through-march-2017/

    the economics don’t lie. if it weren’t for socialized oil production none of this would be happening.

  15. GregT on Mon, 7th Aug 2017 7:49 pm 

    “If you can’t answer those questions you know little about US oil..”

    Coming from the guy who doesn’t even know how to spell Permian. Priceless.

  16. boat on Mon, 7th Aug 2017 8:19 pm 

    twocats,

    Tell that to the investors and banks who lost when many oil companies wen’t bankrupt. Socialized my ass.

  17. GregT on Mon, 7th Aug 2017 8:40 pm 

    You obviously don’t understand what socialized means either boat.

  18. rockman on Tue, 8th Aug 2017 9:41 am 

    twocats – “and after two years, 2003 remains the best performing shale oil wells.” The “2003” is a misprint I assume?

  19. rockman on Tue, 8th Aug 2017 9:45 am 

    “Tell that to the investors and banks who lost when many oil companies wen’t bankrupt.” According to the latest numbers 97% of the oil patch debt hasn’t been canceled by bankruptcy and is still being repaid.

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