Email
Password
Remember meForgot password?
    Log in with Twitter

article imageWeakening gasoline demand in U.S. has refiners worried

By Karen Graham     Feb 5, 2017 in Business
U.S. refiners are facing the prospect of another year of dismal earnings as a weakening demand for gasoline at the pumps continues its downward spiral.
For refineries, 2016 earning are the worst since the U.S. shale boom began in 2011 and it's looking like the trend will continue through 2017. Added to this, the oil boom turned to a bust in 2014, leaving refiners to reap profits as prices dropped at the pump and a growing economy created a fuel surge.
Refiners amassed a huge inventory of gas stocks that proved to be profitable as demand at the pump rose and rising exports kept profits from slipping. But that rosy picture has started to fade due to higher crude prices and global production cuts, leaving the gasoline demand safety net in a precarious position, reports Reuters.
“We are very cautious on refining margins, and on demand," Sarah Emerson, a managing principal at ESAI Energy LLC, said. "When oil prices go up, gasoline demand is going to go down.”
Covering around 750 acres  the PBF Energy Inc. refinery in Torrence  California is one of six refine...
Covering around 750 acres, the PBF Energy Inc. refinery in Torrence, California is one of six refineries in the region.
YouTube
Robert Boslego, writing for Seeking Alpha says the U.S. Energy Information Administration (EIA) admitted to overestimating demand last year. It seems the EIA had underestimated gasoline exports which led them to overestimate domestic use. On paper, this made domestic use look better than it actually was.
This resulted in the EIA reporting on Wednesday that the four-week average of gasoline supplied in the United States was 8.2 million barrels per day, the lowest since February 2012. U.S. gasoline demand is watched very closely by traders because the country accounts for about 10 percent of global consumption.
"It’s tough to base conclusions solely on the weekly data, which can be off significantly," said Mark Broadbent, a refinery analyst with Wood Mackenzie. "If the demand is low as the data shows, then it’s a going to be a real problem for refiners."
So what's influencing the downturn in demand? No one has a good answer, with everything from better fuel efficiency, urbanization, weather and a graying population being suggested as reasons for the drop. And while both crude inventories and gasoline stocks have been rising, the EIA admits that gasoline demand dropped 5.7 percent from a year ago over the past four weeks. Maybe the demand slump is just seasonal?
More about gasoline demand, domestic demand, dismal earnings, weakening demand, Exports
More news from
Latest News
Top News