Supply Chain energy supply under pressure while economy recovers

According to the American Petroleum Institute, these concerns are not unwarranted

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With Oil prices exceeding more than $90 a barrel as the Christmas holiday approached, supply chain analysts voiced concern that demand might outstrip supply later this year.

According to the American Petroleum Institute’s (API) chief economist John Felmy, these concerns are not unwarranted.

“Presently, there’s been strong growth in crude, but demand from India and China is also increasing, and OPEC is restraining its capacity. At the same time, we have in this country, a ‘permatorium’ on offshore drilling, which poses another problem.”

At the same time, however, news coming from API has been largely positive of late.

Total U.S. petroleum deliveries (a measure of demand) increased 6.5 percent in November compared with November 2009, evidence the nation’s consumer and industrial sectors are recovering, according to API’s Monthly Statistical Report. The step-up in fuel demand represented the largest year-to-year increase for any month in 2010.

Gasoline deliveries rose 3.2 percent this November from a year ago while distillate fuel deliveries jumped 13.5 percent. Ultra-low sulfur distillate deliveries – the diesel used in trucks – were up 13.2 percent. Jet fuel deliveries experienced a robust 16.7 percent increase.

“Fuel demand continues to strengthen, a positive sign for our economy. Gasoline deliveries are up three months in a row and distillate deliveries are up 10 months in a row over the same months in 2009,” said Felmy. “Stronger fuel demand tells us a recovery is underway.”

Domestic crude oil production stood at 5.44 million barrels per day in November up slightly from last year, down 1.3 percent from October, but the highest total for any November since 2003. Rig counts rose to their higher level for the year at 1,683, according to Baker Hughes, Inc.

November’s 10.9 million barrels a day of crude oil and product imports were lower than November a year ago by 1.1 percent, driven by double digit declines in product imports. Crude oil imports were five percent higher than a year ago, averaging 9.1 million barrels a day. While the highest total for any November since 1987, domestic crude oil inventories were lower than last month. November gasoline stocks were down three percent and distillate stocks were 3.8 percent lower compared with October.

Refinery utilization reached 83.2 percent of capacity in November, higher than this past October and November 2009. The rate was 15 percentage points above the average utilization for all U.S. manufacturing (in October 2010), according to Federal Reserve Board data.


About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

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