Exploring Hydrocarbon Depletion
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Page added on August 1, 2012
There was an opinion piece in The Wall Street Journal Tuesday, critical of the Obama administration on several fronts.
We won’t comment on the piece as a whole, but one passage caught our eye:
This administration’s policies — its refusal to allow a private company to build the Keystone XL pipeline, its reduction in permits for offshore drilling and increased EPA regulation of pollutants — retard the production of gasoline. If transportation is an important input from government to creating a favorable climate for business, shouldn’t we be encouraging, not discouraging, gasoline production?
It’s always possible to look at a number and say that if it wasn’t for certain policies that number would be higher (or lower). It’s especially tempting to say that if the number in question doesn’t support a hypothesis. And in this case, the evidence is ambigous.
The fact is that US total gasoline supply — consisting of finished gasoline, including ethanol and other blending components — is showing some signs of decline, but so is demand.
This year, from April through last week, total US supply of finished motor gasoline coming out of refineries and blenders averaged 9.017 million b/d, according to Energy Information Administration data. That’s down from the corresponding period of last year, when it was 9.16 million b/d, and down a lot more from the corresponding period of 2010, when it was 9.266 million b/d.
But go a little further back, and you see that current refinery output is about flat to the three years between 2007 and 2009. Average daily output in the April-to-mid-July periods for those years, including the rip-roaring demand year of 2007, was, respectively, 9.098 million b/d, 9.06 million b/d, and 9.015 million b/d.
Demand? As measured by the “product supplied” category of the EIA, it’s down from a 9.762 million b/d peak of 8/17/2007 to last week’s 8.66 million b/d, a drop of more than 1 million b/d.
So with refiner/blender gasoline output that’s flat against four-five years ago, but with US demand down by more than 1 million b/d from its peak, where has the output gone? To exports, of course. In August 2007, the US exported about 107,000 b/d of finished gasoline. But in all of 2011, US finished gasoline exports averaged 478,000 b/d, and through the first five months of this year, they have averaged 396,000 b/d.
Is that a record of government discouraging output? It’s a close enough call to set off more than a few debates.