194 PETROLEUM TECHNOLOGY, ECONOMICS, AND POLITICS
crude oil market in the United States is the largest oil market in
the world and accounts for almost 24% of world oil demand (BP,
2008). Gasoline accounts for about 50% of total US oil demand at
approximately 9 million barrels per day. The US oil market is very
important not only because of its size, but also because it is a center
of oil price formation led by oil price determination in the NYMEX
(New York Mercantile Exchange) oil futures market.
In spite of predictions of gloom-and-doom for remaining petroleum resources, gasoline consumption in the United States has been
growing steadily in recent years, backed by such factors as strong
economic growth and the popularity of less fuel efficient vehicles
like sports utility vehicles (SUV). The recent turndown in the economic climate has curbed this demand somewhat but demand is
expected to recover and increases in the short term.
However, demand for crude oil in the United States continued
to grow steadily led by gasoline demand growth, and bottlenecks
emerged in the oil product supply chain. First, domestic oil refineries in the United States are operating at full capacity with the
refining utilization rate exceeding 90% on annual average. Second,
surplus production capacity for petroleum products in the United
States is very limited. Finally, oil inventories in the private sector
have remained low because of oil industry efforts to reduce costs.
In terms of some surplus refining capacity in the United States
(Chapter 6) and the issues regarding oil product specification, the
problems continue in the United States market. The downstream oil
market plays an important role in stabilizing supply and demand
in terms of the share of the world market, because (1) the United
States is the world's largest oil consumer and the oil price determination in US (NYMEX) influences the world oil prices, and (2) the
oil product supply-demand balance in the United States remains
tight as there is little or no spare domestic refining capacity.
In addition, investor constraints also exist for refinery investments, although this may differ in existence and degree by economy. Some of these constraints are:
1. Low return on investments including low refining
margin, huge upfront investment costs, high risk due
to instability and uncertainty of crude oil supply
2. Site acquisition and permitting problems for refinery
construction
3. Stringent environmental standards and the changing
fuel specifications.
crude oil market in the United States is the largest oil market in
the world and accounts for almost 24% of world oil demand (BP,
2008). Gasoline accounts for about 50% of total US oil demand at
approximately 9 million barrels per day. The US oil market is very
important not only because of its size, but also because it is a center
of oil price formation led by oil price determination in the NYMEX
(New York Mercantile Exchange) oil futures market.
In spite of predictions of gloom-and-doom for remaining petroleum resources, gasoline consumption in the United States has been
growing steadily in recent years, backed by such factors as strong
economic growth and the popularity of less fuel efficient vehicles
like sports utility vehicles (SUV). The recent turndown in the economic climate has curbed this demand somewhat but demand is
expected to recover and increases in the short term.
However, demand for crude oil in the United States continued
to grow steadily led by gasoline demand growth, and bottlenecks
emerged in the oil product supply chain. First, domestic oil refineries in the United States are operating at full capacity with the
refining utilization rate exceeding 90% on annual average. Second,
surplus production capacity for petroleum products in the United
States is very limited. Finally, oil inventories in the private sector
have remained low because of oil industry efforts to reduce costs.
In terms of some surplus refining capacity in the United States
(Chapter 6) and the issues regarding oil product specification, the
problems continue in the United States market. The downstream oil
market plays an important role in stabilizing supply and demand
in terms of the share of the world market, because (1) the United
States is the world's largest oil consumer and the oil price determination in US (NYMEX) influences the world oil prices, and (2) the
oil product supply-demand balance in the United States remains
tight as there is little or no spare domestic refining capacity.
In addition, investor constraints also exist for refinery investments, although this may differ in existence and degree by economy. Some of these constraints are:
1. Low return on investments including low refining
margin, huge upfront investment costs, high risk due
to instability and uncertainty of crude oil supply
2. Site acquisition and permitting problems for refinery
construction
3. Stringent environmental standards and the changing
fuel specifications.