THE CRUDE OIL MARKET 201
(Figure 2.1). This share is set to continue to rise, reaching 52% by
2030. The growing importance of the transportation sector to oil
demand is unsurprising, given the limited fuel switching possibilities and the expected continued growth in people's mobility
(BP, 2008).
The market for distillate fuel oil use ranks second behind gasoline. Unlike gasoline, which is used almost exclusively in the
transportation sector, distillate fuel oil is used more widely for the
following purposes:
1. Home heating fuel
2. Industrial power
3. Electric generation
4. Diesel-fueled vehicles.
Diesel fuel used in vehicles on the highway for trucks, buses,
and passenger cars must be low or no sulfur, while distillate fuel
oil used off the highway for vessels, railroads, farm equipment,
industrial machinery, electric generation, or space heating is not
subject to the same low sulfur highway standard, but as a matter of course contains only a small amount of sulfur. The Unites
States Department of the Treasury also requires that the nonhighway product must be dyed to distinguish it from the taxable
on-highway diesel. These requirements also limit distribution
flexibility for distillate fuels, requiring segregated storage and
transportation, and preventing one product from easing shortages of the other.
The market for jet fuel is the third-highest product in demand and,
like gasoline, is largely confined to use in the transportation sector.
The military formerly utilized a different, naphtha-based product
for aircraft, instead of the commercial, kerosene-based product, but
in recent years, has converted to kerosene-based jet fuel.
Residual fuel oil is the heavy fuel used in boilers for power generation and to propel tankers and other large vessels, but the market
has been eroded by a variety of factors, including price competition
with newly available natural gas and environmental restrictions.
Residual fuel oil's use for apartment building space heating is now
confined largely to older buildings in New York City.
Market prices of crude oil have varied over the past 25 years
(Table 7.1; Figure 7.1) and, like those of other goods and services, reflect both the product's underlying cost as well as market
(Figure 2.1). This share is set to continue to rise, reaching 52% by
2030. The growing importance of the transportation sector to oil
demand is unsurprising, given the limited fuel switching possibilities and the expected continued growth in people's mobility
(BP, 2008).
The market for distillate fuel oil use ranks second behind gasoline. Unlike gasoline, which is used almost exclusively in the
transportation sector, distillate fuel oil is used more widely for the
following purposes:
1. Home heating fuel
2. Industrial power
3. Electric generation
4. Diesel-fueled vehicles.
Diesel fuel used in vehicles on the highway for trucks, buses,
and passenger cars must be low or no sulfur, while distillate fuel
oil used off the highway for vessels, railroads, farm equipment,
industrial machinery, electric generation, or space heating is not
subject to the same low sulfur highway standard, but as a matter of course contains only a small amount of sulfur. The Unites
States Department of the Treasury also requires that the nonhighway product must be dyed to distinguish it from the taxable
on-highway diesel. These requirements also limit distribution
flexibility for distillate fuels, requiring segregated storage and
transportation, and preventing one product from easing shortages of the other.
The market for jet fuel is the third-highest product in demand and,
like gasoline, is largely confined to use in the transportation sector.
The military formerly utilized a different, naphtha-based product
for aircraft, instead of the commercial, kerosene-based product, but
in recent years, has converted to kerosene-based jet fuel.
Residual fuel oil is the heavy fuel used in boilers for power generation and to propel tankers and other large vessels, but the market
has been eroded by a variety of factors, including price competition
with newly available natural gas and environmental restrictions.
Residual fuel oil's use for apartment building space heating is now
confined largely to older buildings in New York City.
Market prices of crude oil have varied over the past 25 years
(Table 7.1; Figure 7.1) and, like those of other goods and services, reflect both the product's underlying cost as well as market