CRUDE OIL: a look at historic US Gasoline sales and prices.

With crude being the hot topic of the week, and since probably everything than can be said about it has been said already, I figured why not take a look at its most important derivative: motor vehicle gasoline. Namely, nearly all crude oil (in the USA) is refined into petroleum products such as gasoline, diesel fuel, heating oil, and jet fuel. One 42-gallon barrel of oil creates 19.4 gallons of gasoline. The rest (a little more than half of that same barrel) is used to make pretty much anything else and many none-liquid products that we enjoy in our modern world: from shower curtains to surfboards and from antihistamines to heart valves.

The International Energy Agency (EIA) estimated that in 2011, 89 million barrels of oil and liquid fuels were consumed per day worldwide. The USA consumed ~19 million of those barrels (21%) per day. With just one country being such an important player in the oil and gasoline markets, it is understandable that a look at US-gasoline consumption, -prices and -refinery gasoline output is an interesting read for a long weekend.

gasoline 1

US gasoline consumption demands a first look, of course. The above plot (EIA data) shows that gasoline consumption peaked in 2005 and has been dropping since (click picture to enlarge). The somewhat improved vehicle fuel efficiency (including electric vehicles) over the past 10yrs cannot explain all of the decline. The plot below (EIA data) shows that actual US refinery motor vehicle gasoline production has plummeted to record lows under the Obama administration (click to enlarge).

gasoline 2

Hence, US refineries are not producing much motor vehicle gasoline at all anymore. This is in line with the decreased gasoline consumption, but the decrease is so dramatic that production of other derivatives is likely more important. Of course replacement of gasoline by (corn) ethanol also plays a role, but can’t explain the drastic drop either, since

  • currently around 5-6% of a gallon of gasoline is ethanol, and
  • ethanol represented 10% of the U.S. gasoline fuel supply derived from domestic sources in 2011.

Note that due to ethanol’s lower energy density (1.5 gallons of ethanol has the same energy content as 1.0 gallon of gasoline), a (flex-fuel) vehicle will experience a ~30% drop in its fuel mileage (miles/per gallon; MPG) when using E85 (85% ethanol) products as compared to 100% gasoline…

Last, but certainly not least; gasoline prices at the pump. This is what matters most to the consumer. The two previous variables are more related to economic activity. As you can see from the plot below (click to enlarge), gasoline prices sky rocketed under the two Bush Jr. Administrations and fell even faster during the 2008/2009 market crash. Since then gasoline prices have recovered entirely during the Obama administrations but are now obviously falling again to levels not seen since the past 4 yrs. Deflation at work at it’s best. But, you won’t hear me or any consumer complain about lower prices at the pump. That means more money in our pockets to do/buy something else.

gasoline 3

Note that one could count the price move off the January ’99 low to the ’08 high as 5 waves up, then a fast and furious A wave down into early 2009, followed by 3 waves up to the ’11/’12 highs… What should follow now is a vicious C-wave down…

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