The US Energy Information Agency reported another build in fuel supplies last week on low demand and high production. If crude supplies continue on this trajectory another few weeks, they may hit record levels. And lower heating needs from the fast-approaching Spring mean that diesel prices are indeed close to the parity with gasoline I mentioned a few days back.
Crude supplies rose 2 million barrels per day (Mbd) on lower demand from refineries and higher domestic production that offset lower imports. Crude inventories are now ~13% above last year and significantly above the historical average.
Distillates and propane fuels are also at historically high levels, 25+% above last year. Gasoline supplies are also up, though they are below last year’s very high levels. Low demand for these fuels means that greenhouse gas emissions from petroleum are poised to fall again in 2008, though not as quickly as last year unless the recession deepens further and/or climate consciousness can help drive behavior change toward increased use of bicycles, transit, and vehicle efficiency.
These high inventories help keep oil prices at levels much below 2006-2008, ameliorating our tough economic times. But the falling oil rig count means that later in 2009-10, non-OPEC oil production will naturally fall. In what some see as a goodwill gesture for the global economy, OPEC decided last weekend to focus on full compliance of the previously agreed cuts in output rather than cutting its goalposts further.
So while oil prices may pass $50 per barrel in the months ahead, they do not appear set to rise above the 2007 average of ~$72 until economic recovery takes hold in 2010 or beyond.
We’ll see how oil markets develop, and I’ll report on the natural gas inventory numbers as they come out later in the week. Here’s to us choosing (and incentivizing through policy) the climate responsible road of lower carbon energy and efficiency going forward!