The summer driving season in the U.S. — between Memorial Day and Labor Day — has historically been a time marked by high gasoline and jet fuel demand as vacationers take to the roads and sky in great numbers.
This summer, there has been a considerable uptick in transportation fuel consumption versus previous periods, almost at historical record levels, according to data from the EIA. This data corresponds with anecdotal evidence of pent-up travel demand among the U.S. population, as the economy emerged from the pandemic and people took advantage of the removal of COVID-19 related restrictions, which may have prevented many from completing previously held travel plans.
Transportation fuel demand has risen, and supply from the U.S. refining sector has kept up with it — providing U.S. consumers with a stable supply. The EIA expects an average rate of gasoline consumption in 2023 of 8.92 million b/d, an increase of 1.56% over 2022 levels of 8.78 million b/d. For reference, average yearly gasoline consumption was at the highest rate ever in 2018 when it hit 9.33 million b/d, according to an EIA dataset going back to 1990. This year, ahead of the U.S. July 4th holiday weekend, weekly gasoline consumption hit a 19-month high of 9.4 million b/d, per the EIA.
With the ramp-up in transportation-led demand, it’s not surprising that gasoline inventories have seen similar declines. Refiners began the summer with lower seasonal inventory levels due mainly to a refinery maintenance period that lasted an extra three to four weeks, according to the EIA. This required maintenance took capacity offline during a period ordinarily used for refinery stock building in preparation for higher demand levels during the summer driving season.
To compensate for lower inventory levels and to meet heightened summer demand, refineries have operated at above-average utilization rates, often eclipsing the longterm weekly average for this time of year, of about 90%, according to EIA data. The spring 2023 startup of a third crude oil refining unit at ExxonMobil’s Beaumont, Texas, refinery added 250k b/d of processing capacity to the U.S. refining system, which has been averaging 18.27 million b/d of operable capacity since the first week of June 2023, according to EIA weekly data.
As Gulf Coast refiners go through the 2023 Atlantic hurricane season, which runs from the beginning of June through the end of November, U.S. refinery operations could experience reduced capacity conditions. Severe storms can require operators to halt or shut down units to maintain safety for workers and the community. Hurricanerelated disruptions have occurred in recent years, including widespread shutdowns after Hurricane Harvey in August 2017.
Refiners are also contending with volatile global crude oil markets, which have been affected by mixed data about a global economic recovery story post-pandemic. A driving factor has been market sentiment that China’s economic recovery — the largest consumer of crude in the world — is lacking momentum.
The International Energy Agency, in its closely watched Oil Market Report for July, revised downward its expectations for global oil demand growth for the first time this year, by 220k b/d to 2.2 million b/d, with expectations for the oil demand growth rate to reduce by half to 1.1 million b/d in 2024. OPEC+ member countries, whose cumulative production represents approximately 30% of total global oil supply, have increasingly faced tighter fiscal budget demands at home. Since these economies largely depend on fossil fuel exports, the bloc has taken market action in 2023 by announcing output cuts.
The U.S. O&G industry has a proven track record of being a reliable and affordable provider of transportation fuel to the domestic market and a vital source of supply to its trading partners abroad. As a net exporter of refined products, the U.S. refining industry could fill supply gaps abroad, such as the case with the European Union, after it could no longer accept Russian refined product imports following sanctions implemented as punishment for its invasion of Ukraine in February 2022.
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