More pipelines reverse flow as US demand falls

A recent post covered the plan to reverse the flow of oil along the pipeline that runs sensibly from Detroit to Portland, ME (Or if you are Canadian, since it actually runs most of the way through Canada, from Sarnia to Montreal and beyond). The move is one way of distributing the increasing flows of oil that are being extracted from the oil sands of Alberta, to take advantage of existing pipelines and to meet distributed diemand.

And while the plans for the Keystone pipeline are currently on hold, there is another pipeline which is also being reversed. This is the Seaway pipeline and it runs from Freemont TX to Cushing, OK. It can carry some 400 kbd of oil, and the intent is to have to reversal completed by 2013. This will get around some of the bottleneck that has been building at Cushing, and move more crude down to the refineries along the Gulf. The hope is that it will allow domestic oil to replace some of the crude that is currently imported to those refineries, as domestic production rises to an estimate of 6.4 mbd by 2016. (With that additional rise of around 0.7 mbd from Alberta still, hopefully, coming down to the Gulf Coast as well, by 2015). It is expected that the first 150 kbd may flow by the second quarter of next year.

There are also plans to reverse the flow and increase capacity to 225 kbd with the Longhorn pipeline that runs from El Paso to Houston to carry Permian Basin oil to refineries, by 2013.

Changes planned for the Longhorn pipeline (Magellan)

As these moves are planned, it is worth noting that the demand for gasoline has been falling in the US. This is evident from the latest EIA TWIP. The fall has been as much as 500 kbd, which is significant.

Changes in U.S. gasoline demand (EIA TWIP )

It has even caught the attention of OPEC, in their latest (November) Monthly Oil Market Report, which contrasts the fall over two years, showing the drop from pre-recessionary times. (The peak was 9.6 mbd). OPEC sees overall US demand falling 0.11 mbd in 2011, and only picking up by that amount in 2012.

Fall in summer driving demand for gasoline (OPEC Nov 2011 MOMR)

In passing the MOMR also notes that Russian production of passenger cars rose 46% y-o-y, which may mean that export volumes may fall more rapidly than currently anticipated. Oil consumption in the countries of the FSU is reported at 4.2 mbd, a gain of 0.1 mbd y-o-y. (Sales of U.S. vehicles were up by 10%. ) Their current projections, recognizing the economic problems of Europe, is that world demand will grow to 89 mbd next year, with half of the 1.2 mbd increase coming from Asia, and 0.48 mbd coming from China.

Turning back to the change in driving habits in the United States, the recovery – as evidenced by vehicle miles travelled - faltered and fell back earlier this year, showing the inherent problem still resident in the U.S. economy.

Rolling 12-month average of the vehicle miles travelled on all roads in the United States, through September 2011 (FHWA )

Current declines are seasonal and see to be following the patterns of previous years.

Urban travel on US highways, by month (FHWA )

However there are reports of healthier numbers now coming out of the U.S. economy, and so hopefully, these trends will turn around.

Fuel for America's transport needs

When groups such as OPEC try to predict the future demand for oil and petroleum products, one of the significant factors in that analysis lies in the demands of the US transportation sector. I have intermittently tracked those numbers, through the Vehicle Miles Travelled plot which the FHWA publishes each month, and here is the latest plot, which includes figures through last November. Bear in mind that this is a rolling 12-month total of miles travelled.

12 month rolling total of vehicle miles travelled in the USA (FHWA )

It is becoming increasingly evident that the plot has returned to a steady increase that has now been sustained at about the same rate as being maintained up to the earlier peak.

The question now comes, as evidenced by the remarks of London’s Mayor, as to how much higher the price of gasoline/diesel fuel will rise before it, once again, has an impact on overall growth. Overall growth was around 1.1% in November, up more than the annual average increase of 0.7%.

Driving is, to an extent, seasonally controlled, as this plot of the last three years driving, by month illustrates.

Travel on US Urban Highways by Month (FHWA)

Thus the bitter cold and poor driving conditions of the last couple of months may have had a negative impact on the overall totals, moving forward from the end of the plot, yet overall the recovery seems to be being well maintained.

This return to a higher level of demand is the subject of the front page comment on This Week in Petroleum which the EIA issued today (Wednesday). They note that transportation accounts for 72% of US petroleum consumption, at 12.9 mbd out of the current national total demand of 18 mbd. In the latest Energy Outlook the EIA has projected that GDP will grow steadily at 2.7% over the next 25 years, including a steady growth in transportation fuel use.

DOE projections for energy distribution (Energy Outlook )

As an aside it is interesting to note the EIA comment:

Although the situation is uncertain, EIA’s present view of the projected rates of technology development and market penetration of cellulosic biofuel technologies suggests that available quantities of cellulosic biofuels will be insufficient to meet the RFS targets for cellulosic biofuels before 2022, triggering both waivers and a modification of applicable volumes, as provided in Section 211(o) of the Clean Air Act as amended in EISA2007. The modification of volumes reduces the overall target in 2022 from 36.0 billion gallons to 25.7 billion gallons in the AEO2011 Reference case, equal to the AEO2010 Reference case.5

Well I don't think that is much of a surprise. In regard to more conventional ethanol production, it appears to have reached a current plateau at 0.9 mbd.

Turning to the more usual look at the charts, the anticipated decline in demand over the quarter has led to a drop in refinery activity.

Refinery inputs (EIA)

However the production of crude dropped even faster:

US crude oil production (EIA)

The difference has come from increasing imports. We will see whether this is a transient or more permanent change.



Retail gas prices now average $3.11 per gallon in the US (locally we are still hovering around $3.00), still a fair way below the $7.75 of the UK, but one wonders whether the steady ramp up in price will continue for another year or so, and if it does, what the consequences will be.

A VMT oddity and the latest TWIP

I have been writing about the use of the monthly reports from the Federal Highway Administration (FHA) on vehicle miles travels, at intermittent intervals over the past couple of years. It provides an informal way of trying to see how fuel demand is going in the United States, and perhaps some indications of the recovery of the economy. The figures are now out for September 2010 and I was looking at the plot I usually use of the rolling 12-month average of miles driven:

Rolling 12-month VMT (Source FHA )

I hadn’t been paying much attention to the lower scale, it shows years and it wasn’t until I tried to see when it was that the driving was last at this level that I realized that the scale does not include years that end in 4 or 9. Which is my oddity for the day.

Other than that the recovery of driving seems to be holding up both in urban and rural areas, and generally across the country. Texas seems to be doing a little better than most, but other than that the picture appears to be, as the plot shows, one of steady growth at a rate similar to that before the great oil price boost.

Moving over to This Week in Petroleum the picture similarly shows nothing particularly out of the ordinary. The EIA is going to take a slightly different look at storage capacity data, and that is their front page story of the week, but as one looks at the plots, other than the slow creep up in oil prices, there is little untoward in them. Domestic production has continued to increase, lowering the need for imports, at a time of year when refinery inputs in general are down.

Source EIA

At the same time ethanol production is continuing its steady climb in production:

Source EIA

At a time when the gilt seems to be wearing off the ethanol gingerbread, the public discussion seems to be having little effect on that reality.

But other than that, nothing much of significance that I can see, (which doesn’t mean that I’m not missing something – perhaps that gasoline demand has dropped to the same level as last year?)

September TWIP and July VMT

One of the metrics of the economy that serves as a marker to me on how we are doing relates to the use of vehicles, and as a consequence the amount of gas that is being used. Prices of gas haven’t changed much over the past months, nor has the price of crude. Thus without price fluctuations confounding the causes of change, it is possible to get some measure of how we’re doing from how much gas is being used. Recognizing that the summer driving season is now over, but that information is now available on how the patterns of driving went.

This Week in Petroleum, where I get the data on this, has, this week, focused on the impact that Canada is having on imports, given that it is the largest supplier to the USA at the moment. Part of the story they told this week was that the impact of pipeline problems between the two countries had not ultimately had much impact, and service is now resumed.

From TWIP Sept 29, 2010

The Canadian supply has remained relatively steady over the years, and not been much impacted by the declines in demand recently, though as a seasonal event, the demand for crude is currently falling.


If one looks at the TWIP monthly figures rather than the annual demand, the fall in demand that started some months ago, is continuing, and given that domestic production remains relatively level, it will be interesting to see when this turns around.


The amount of gasoline produced from this crude input would, logically, also fall, as it has been though it has just recently had a little uptick, relative to the trend of a year ago.


That is as a result of an increase in demand that can also be seen in the TWIP figures.


One week’s data should not, of course, be construed as having much import on its own, but it is worth watching.

Ethanol production, after a relatively steady, though small increase, concurrently had a slight dip, though this is, I suspect, likely to be insignificant in the longer term.


Looking at vehicle miles driven, the last report for which relates to July numbers, the curve (bearing in mind that it is a 12-month rolling accumulation) has picked up and is now past the early “bump in the road” which we saw earlier in the year.


The slope is not yet that exciting, with the overall levels still equivalent to those back in 2005, but it is upward and a recognition that things are doing better. And it appears to be an across the board increase around the country, and in both rural and urban driving.

The question however, will likely arise before too long as to what impact the increasing demand is going to have on prices. For while the demand in the US and Europe has seen anemic growth, that in Asia is much more robust, and has been consuming the “slack” that had been left in global demand. We shall see how this impacts the capabilities of world suppliers to continue to meet this, in the months ahead.

TWIP for August 11th

Before the Deepwater Horizon incident I would follow the EIA weekly announcements known as This Week in Petroleum and occasionally comment on what I thought to be important. At the same time, trying to discern how the economy was improving, if at all, I would look at the data from the FHWA on the vehicle miles travelled, and include that each month. For a variety of reasons it looks as though I haven’t done that since February at which point the US demand for gasoline was falling below that of a year ago, inputs to refineries were below that for 2009, and the VMT (which appears three months later) were showing that November numbers were somewhat more positive.

So with this 6-month hiatus, and being now towards the end of the summer driving season, how have things progressed?

In terms of the demand for gasoline, this is up close to 200,000 bd over last year:




Just to see how it progresses over the next few months, as corn and grain prices may rise due to the problems, inter alia, in Russia I am going to add the ethanol production curve from TWIP to the mix I will look at.


Gasoline comes from refineries, and looking at the input to those refineries, this has been increasing, relative to last year, though it may have peaked, a little later than last year, for this season.


Domestic production of crude remains quite flat, and for the next couple of months may depend on how relatively calm the Hurricane season remains, remembering that it was predicted to be more severe than usual.


Which means that the increase in demand must be met by increased foreign imports, which is what is being reported.


The increase in imports indicates that there is a growth in the economy that it is rising to meet, and this is recognized in the Short Term Energy Outlook that the EIA released yesterday. They anticipate that, overall, demand will rise by 140,000 bd this year, and by 170,000 bd next year.

With the global economy also growing, the question arises as to where this oil will come from. The EIA notes that while non-OPEC production is expected to rise by 0.72 mbd (million barrels a day) this year (based largely on increased production from the USA, Brazil and Azerbaijan) it will drop by 0.16 mdb next year (mainly due to falls in production in the North Sea and Mexico). Which, with an overall estimate of world demand growth being 1.6 mbd this year, and 1.5 mbd in 2011 raises the reasonable question as to where it is going to come from.

The only answer is OPEC (which, as I’ve mentioned before, is why it is their production which is now controlling the price of oil). The EIA see their spare capacity as being around 5 mbd. I personally think this is about twice the real value, but that is a discussion for another day. (But if the growth rate continues for 3 more years it may well be consumed).


So will growth rates be sustained? Well the main story at the front of the TWIP this week was on the rising demand for jet fuel, for the first time since 2007, and having just come from a total of 3 flights that were all “full to the gunwales” the demand for travel may be picking up.

But if one goes back and looks at the VMT for May, that recovery that I was beginning to see in February, hasn’t continued through the Spring, but rather reached a plateau. We will have to wait a couple of months to see whether that number has picked up as well as the air travel.

12-month rolling summary of vehicle miles travelled through May 2010 (FHWA).

As demand rises, can oil supply keep up?

Liquid hydrocarbons provide the fuel for the vast majority of the vehicles that carry us to and fro over the course of a day. The latest edition on the TWIP comments, in looking at the future of vehicles through the eyes of the Annual Energy Outlook, released this month, that:

the market share of alternative vehicles will increase to 49 percent of new vehicle sales by 2035 due to the combination of more stringent corporate average fuel economy standards, the renewable fuel standard and higher fuel prices (See Figure 1). However, with continuing improvements in the fuel economy over time, conventional gasoline-powered vehicles are projected to retain the majority of sales.

Figure 1 looks like this:

EIA projects for vehicle fleet changes in future years (EIA)

But the projection carries with it some inherent assumptions about the continued availability of those fuels, both here and in the other countries around the world. And in some of those growth is expected to be such that, by 2035, countries such as China will have more vehicles on the road that the USA. Last year the Chinese car industry overtook that of the United States, and just recently Saudi Arabia began selling more oil to China than it does to the United States. Sales to the US averaged about 2,000 bd below 1 mbd last year, while those to China just crossed that significant marker. Similarly Russia, the country that now leads the world in crude production, increased its sales to China so that it now supplies around 7.8% of total Chinese crude imports. (Through last October this amounted to around 100 million barrels of oil for the year).

There is a new pipeline that is being constructed to help those exports, with the goal of increasing sales from their current 6% of Russian exports to between 20 and 25%.

After many years of discussions, the construction of the pipeline started in April 2006. The ESPO was supposed to connect Tayshet (in the Irkutsk oblast) with the Kozmino port on the Pacific Ocean. The new oil pipeline is intended to stimulate the development of a new oil production centre in Eastern Siberia, which is particularly important in view of the expected decline in production from the Western Siberian fields and in the Urals-Volga region. The ESPO's total length will be 4857 km and it will have an annual capacity of 80 million tons. The first section between Tayshet and Skovorodino (Amur oblast) has a capacity of 30 million tons.

Initially, oil will be transported from Skovorodino to Kozmino by rail. The second phase of the project (to 2014–2015) will see the construction of the pipeline section to the terminal in Kozmino (50 million tons) and the expansion of the first section’s capacity to 80 million tons. Moreover, a branch connecting the ESPO with China's Daqing has been under construction since April 2009; it is expected to start transporting 15 million tons a year in 2011 (with an option of extending the capacity to 30 million tons).

Russia’s Energy Strategy through 2030 does not see a shift from fossil fuels to alternative energy until after 2022.

Now these projections of growth, and the fuel supplies required to meet them are predicated on there being enough, relatively economically viable, supplies of crude to meet that demand. There are the occasional troubling signs that this might not be the case.

JoulesBurn has one of his usual, incisive and informative posts on The Oil Drum today discussing his latest analysis of information from the satellite view of the recent Saudi addition at Haradh. This, the third addition to the program of extraction from the Southern tip of the large Ghawar field, is being produced, and bragged about by the Saudi, at a level of 300,000 bd. But as Joules has spotted, and pointed out, there are a lot more production wells that have been drilled into that field in recent years than Saudi Aramco have been admitting to, and their placement suggests that they are being needed to maintain production from wells that might not have been able to sustain the original targets.

Now that could be a problem, and Ace has commented that this could signify that Aramco might not be able to sustain more than 8.35 mbd this year, and expects a decline next year.

Into this picture now increasingly steps the slowly growing global economy. And as it seasonally happens US demand for gasoline is beginning the steady increase that normally occurs between now and mid-summer, with the concomitant increases in price.

US Demand curve from TWIP (March 3, 2010 )

Turning to the vehicle miles travelled data for last November the numbers were positive across the entire country, with an average increase of 1.4% over the previous November. (This is in contrast with the October figures where the overall had shown a drop of 0.7%, the first drop in 5 months). The rolling 12-month total, because of that, reached a plateau, though I expect that it will return to upward progress next month, perhaps beginning to exceed the driving done in 2004.

Rolling 12-month total of vehicle miles driven in the USA through November 2009. (FHWA )

Gasoline demand, August driving and winter weather

Wednesdays are when the TWIP (This Week in Petroleum) is issued by the EIA. Today’s cover note deals with the relatively changing prices of distillates (which includes diesel) relative to gasoline. In the past year the United States has become a net exporter of distillate, and even though the market has fallen, continues to be one, averaging about 350 kbd.

Looking at the gasoline demand, as we move further into a winter heating season, with less driving, there has been a fall-off in demand, though it is still higher than a year ago.

U.S. gasoline demand (TWIP )

When one contrasts this with the changes in driving patterns, now available from the FHWA for August, overall travel is up some 0.7% over August of 2008. Looking at the curve above the greatest impact of the recession on gasoline demand did not occur until September last year, and so this shows a further increase in the recovery. That is best shown by the running 12-month of vehicle miles driven.

12 month running total of vehicle miles driven in the USA. (FHWA)

The upturn in the curve is now clearly defined. The gains are not, however, this month distributed around the USA. Both the North East and the North Central parts of the country are showing a decline in driving, and it is in the South and West that there have been the gains, with Texas and the South Gulf showing the largest increase of some 1.7% over last year. Both urban and rural driving are still showing gains over last year, though now falling away from parity with 2007 (which rural driving almost matched for a short time in July).

We are left to await the coming winter, with the debate as to how hot it will be, relative to normal, given the El Nino condition. Going to the NOAA Winter Outlook prediction site, the winter is largely predicted to be warmer than usual across the country, and as a general rule perhaps a little drier in some parts, though wetter along the coasts. That may help (?) encourage driving over burning winter fuel – we’ll just have to wait and see how it plays out.

Winter outlook for temperatures.

Winter outlook for rain and snow.

These predictions are relatively-short term and it will be interesting to come back to this page in the Spring, and see how accurate the predictions were. (Likely better than mine from 30-years ago, to which I hope to return, perhaps tomorrow).

Promising signs and a gentle cough toward Michael Lynch (again)

Another monthly Traffic Volume Trends this time for June, is now out and confirms the uptick in driving that I have been noting for the past three months is continuing and beginning to gain a little momentum.

The trend is now consistent across all regions, with the West up 2.5%; North Central up 1.6%; North-East up 0.8%; South Gulf up 2.8%; and South Atlantic up 1.8%. When the 12-month rolling total is plotted, the trend is now definitely upwards.

June 2009 12-month rolling total of miles travelled (FHWA)

The report breaks the miles travelled down into rural and urban sectors, and while the rural number has been above last year for a couple of months, it is only this month that the urban miles has also risen above last year.

June 2009 Travel on US Urban Highways by month (FHWA)

This is, again, a somewhat encouraging sign that the economy is in a state of turn around, although, apropos my post yesterday, the big question of what happens when not only the U.S. but all the other countries, including Western Europe also begin to pick up steam and look to additional fuel supplies may be answered more rapidly than had at first been feared. (Although the result of finding out may not be pleasant either).
UPDATE: I changed the plot below of US gasoline demand to the new plot that TWIP published today.

A quick look over at the TWIP shows that gasoline demand has really not changed much – if any, relative to last year, but the volume demand would have to increase quite a bit for that number to detectably change on the plot (the numbers show we are still around 300,000 bd short of last years demand at this time). (Number went up 100,000 bd relative to last week with the new data).

U.S. gasoline demand though August 22, 2009 (TWIP)

As I mentioned last week I expect that OPEC will be able to cope with the increase in demand next year, but will start to strain at the demand in 2011, and have difficulty meeting it towards the end of that year and into 2012.

Now that is not what you will hear from the cornucopians and Michael Lynch had an editorial in the NYT excoriating those of us who doubt.

A careful examination of the facts shows that most arguments about peak oil are based on anecdotal information, vague references and ignorance of how the oil industry goes about finding fields and extracting petroleum.

His main target at the moment happens to be Fatih Birol, the Chief Economist at the International Energy Agency (IEA) whose predictions I wrote about with concern at the beginning of the month. The particular one of concern is that the decline rate that has been reported for older oilfields is now at 6.7%, rather than the 4.5% which has been historically assumed and which models for future supply have been based on. Over a year ago Sam Fourcher in The Oil Drum showed in two graphs (one at the top of the post and the more worrying one, hidden in comments what a difference a change from 4.5% to 5.2% had on the time at which global production would peak (it moved it forward in time about 3 years) and in the steepness of the resulting decline. Now (and Fatih Birol is by no means the first to report these higher numbers) declining production is shown to be 1.5% worse that the second graph assumes. This is not “anecdotal information, or a vague reference.”

Unfortunately when the facts don’t support his argument our good cornucopian carefully changes his topic so that he can tar those of us concerned about the future supply of oil with a set of arguments that he can shoot down, vide:

for the most part the peak-oil crowd rests its case on three major claims: that the world is discovering only one barrel for every three or four produced; that political instability in oil-producing countries puts us at an unprecedented risk of having the spigots turned off; and that we have already used half of the two trillion barrels of oil that the earth contained.

Actually, at the moment none of my immediate concerns and the subjects of recent posts include any of those points. Yes there is a longer concern about the state of reserves – The graphs that are assembled from the Megaprojects database come from the predicted times of planned projects coming on-stream. These are projects that are of significant size, and thus take time to bring to fruition and, at that scale, receive significant coverage in the technical press (Rigzone and the Oil & Gas Journal spring immediately to mind as sources I look at every week among more than a dozen others).

Declining production from different countries (such as the UK and Mexico – as I pointed out yesterday) is a matter of public record, and the amounts that are disappearing from the world stage are not trivial. And when, as I reported yesterday, the major Russian oilfield at Samotlor now finds itself are producing at 90% plus water cut this significantly impacts production (pumps can only physically move certain volumes at a time and if most of it is water you can’t speed up your pump much to increase the oil flow for simple fluid mechanics reasons– a point that seems to be lost on our cornucopian.)

Yes the world continues to find oil in new fields, but they are not as easy to find and develop and they don’t last as long as the old giants. In Russia successive oilfields moved further East as the original fields wore out, and they have now reached as far East as Sakhalin Island.

Sequence of Major Russian oil discoveries and developments (after Grace shown on a Google Earth map )

So, according to Michael Lynch, we should anticipate that if they go North and East of Sakhalin Island they will make their next discoveries and we can all relax.

Oops! There is only one slight flaw in the argument – you see that new area is known as Alaska – Russia sold it some years ago, and I believe that somebody else has already been there and got that oil!

New cars, miles travelled, crude oil and Charles Gibson

Over the past three weeks we have driven to Maine and back, putting 3,000 miles on the new Fusion Hybrid and, in the process averaging some 39 mpg, with times where we got over 41. I think that it is just a little better in that regard than the Camry Hybrid we drove out in last year. And, since it calculates the distance you can travel on a tank of gas based on the average achieved, seeing a 650 mile reserve after a fill-up is quite nice. As I mentioned earlier the trunk space in the Ford is a little smaller than the Camry, and the GPS system is not quite in the Magellan or Garmin class though generally effective.

But that gets me back into my consideration as to where things are going, and a continuation of the thoughts I posted recently on the future of crude prices. I remain somewhat optimistic about where the economy is going to go. There is some evidence that house prices are starting back up a little according to the S&P/Case-Shiller index. This holds true not only in the USA but also in the UK. The numbers are sufficiently small that perhaps we should only recognize the halt in declines, rather than the hope of a continuous upturn, yet it is a start.

On the other hand the upturn in vehicle miles driven that started in April has continued with a y-o-y increase of 0.1% in May. Looking at the 12-month rolling total there is even the hint of an upturn there.

Moving 12-month total of travel on all roads (FHWA)

So what will that do to gas prices? Demand isn’t really changing that much overall for gasoline in the USA, and I really didn’t think that Charles Gibson’s “Over a Barrel – the Truth about Oil”, last Friday, was that obviously enlightening in trying to answer that question. (But if you read between the lines . . . .)


He found that gas stations make more money from their convenience store products than from gas; that all gas regardless of brand usually comes from the same pipeline, in the same truck to all the local dealers; he found that there had been no new refineries in the past 30-years, though smaller ones had closed and others had grown larger;

There are 149 refineries in the United States, 26 fewer than there were in 1995. And the top 10 oil companies control close to 80% of the country’s refining capacity.

But oil industry leaders say that was a necessary business decision in a competitive market. “The smaller, less efficient refineries really couldn’t compete in that environment. They did shut down, so we had a lot of falloff in the industry,” said Rayolda Dougher, a spokesperson for the American Petroleum Institute. “And you are right. If you had overcapacity and you are not able to sell your product at a profit. You are going to have to cut back on that capacity. But look over time, and look at the record and you will see that capacity has grown.”

The ABC report noted that while demand for gasoline has risen 15%, refinery capacity has only grown 14%. But it also pointed out that a major driver on price of product coming out of the refinery is tied to the cost of the crude going into it. And so the story moved to look at both domestic supply (the “drill, baby, drill” argument) and that available from overseas. It quoted Vijay Vaitheeswaran of the Economist, that most of the remaining world reserves of oil lie in Saudi Arabia, Iran, Iraq, Kuwait and the UAE. And the Secretary of Energy was then recorded saying that this condition promised us a “train wreck.”

To see whether this dependence on foreign oil (70% of U.S. supply) could be switched around, the crew visited the Chevron platform in the Blind Faith field 160 miles out in the Gulf. The platform is producing 65,000 bd of crude and 55 mcf of natural gas. But while this individual effort is an indication of where future supply must come from, it will not be enough to satisfy demand.

The report concluded with a remark by T. Boone Pickens suggesting that if all the areas that could be drilled around the nation were drilled and started production, that the total gain in production would only be about 2 mbd. He then pointed out that the US imports 13 mbd. We cannot break our addiction to oil by trying to drill our way of the shortfall in domestic supply.

And so the report ended with the note that gasoline, given all its travels, processing and other costs, is still a relative bargain at $2.50, because there is no recognition of the hidden costs. It really did not draw the logical conclusion that the future strength of the US economy is tied to the benevolence of those five Middle Eastern countries, nor how rapidly that dependence will become evident again. But if you wanted to read between the lines, that message was there, hidden behind the realization that domestic supply alone cannot rescue us from our situation.

Now the actual broadcast covered more ground than is given in the write-up. The good Dr Yergin made an appearance at Cushing, OK talking about the pipelines and the basis for the common established price for crude at that place. And there was some discussion of the role of speculators in driving up the price, but the underlying message remained as the written report notes, that we are heading into trouble – pity it was so well concealed.
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Some new vehicle travel numbers

As I sit waiting for “This Week in Petroleum” to update I wandered over to the Federal Highway Administration to see if the latest Traffic Volume data was available. And it is, with the numbers for December 2008 just having been posted. The reason for the interest can be seen in the plot of miles driven, that they provide, and this is the new one:

Source FHWA

It actually looks a little more fearsome than it is.
UPDATE: The TWIP information has been added.

The data plotted above is a 12-month rolling average, and when you look at the individual month data, and use the urban highways plot as representative (the argument also holds for the rural and total) you can see that driving started to drop last December relative to 2006. Through all of last year it has been down relative to 2007, but with the December figures we are starting to stabilize, and come closer to the previous years figures.

Source FHWA

In fact if you look at the regional plot, the Northeast is slightly up on last year, and most of the other regions are not down much (relative to the previous drops of around 5%).

Source FHWA

So this may mean that for most of us the situation may be stabilizing (sorry West Coast, not you yet). Now this data is still a couple of months old, and it shows that the drop is still going on, but demand for fuel may be leveling off.

Added: A little late today, the TWIP now is up, let me add the two plots from this week that I have been looking for. The first is the demand curve. Now we know from the second figure that driving started its dive last December, so the comparison is with what was already turning into a drop, but if you look at this week’s gasoline demand:
Source EIA TWIP

Then you can see that current demand, which equated to the same number as this time last year last week, has just risen above it this week based on four-week averaging. However if you look at the tabulated numbers the week saw a drop of 100,000 bd on average, which is down 200,000 bd on a year ago.

Source EIA TWIP

Which takes up back to see what is going into the refineries, and this is still paralleling the drop of last year. It is currently about 300,000 bd below last year’s figure.
Source EIA TWIP

Gas prices have now been rising for 3 weeks, while home heating oil prices have been falling for five weeks. But even as refinery input bottomed out at this time last year, so it appears to be doing the same again this year, although we may have to wait a week or two to see a clearer trend.




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