Highlights
Sales of Fuel Oil and Kerosene in 2008
In 2008, overall sales of
fuel oil and kerosene fell sharply from 74.4 billion gallons to 67.2 billion
gallons. The drop of 7.2 billion gallons
(9.6 percent) from the level set in 2007 is the largest drop in combined sales
on record and the lowest combined total since 1995. Distillate sales decreased by nearly 4.5
billion gallons, slipping to 58.7 billion gallons, the lowest total since 1999. Residual fuel oil sales fell by more than 2.4
billion gallons below the level attained in 2007 to 8.3 billion gallons. Kerosene sales also fell sharply, falling
55.6 percent to 218.7 million gallons, the lowest level in more than 25
years.
In 2008, sales of residual
fuel oil accounted for 12.3 percent of total fuel oil and kerosene sales, the
lowest share of the total since EIA began publishing data. The large drop in sales of residual fuel oil
and kerosene, resulted in distillate fuel oil sales accounting for 87.4 percent
of total sales, exceeding the previous highest share of total sales set in
2007, when distillate sales accounted for 84.9 percent of total fuel oil and
kerosene sales. Sales of kerosene made
up just 0.3 percent of total sales, compared to 0.7 percent in 2007.[1]
Table HL1. Volume Distribution of
Distillate and Residual Fuel Oils, 2007 and 2008
|
Energy Use |
2008 Distillate |
2007 Distillate |
2008 Residual |
2007 Residual |
||||
|
Volume (million gallons) |
Percent Share |
Volume (million gallons) |
Percent Share |
Volume (million gallons) |
Percent Share |
Volume (million gallons) |
Percent Share |
|
|
Residential.................. |
4,631 |
7.9 |
5,142 |
8.1 |
— |
— |
— |
— |
|
Commercial.................
|
2,572 |
4.4 |
2,719 |
4.3 |
403 |
4.9 |
481 |
4.5 |
|
Industrial.....................
|
2,366 |
4.0 |
2,467 |
3.9 |
1,034 |
12.5 |
1,187 |
11.1 |
|
Oil Company...............
|
990 |
1.7 |
775 |
1.2 |
58 |
0.7 |
44 |
0.4 |
|
Farm............................ |
3,212 |
5.5 |
3,203 |
5.1 |
— |
— |
— |
— |
|
Electric
Power............. |
544 |
0.9 |
670 |
1.1 |
1,699 |
20.5 |
2,647 |
24.7 |
|
Railroad......................
|
2,697 |
4.6 |
3,635 |
5.8 |
— |
— |
— |
— |
|
Vessel Bunkering……. |
1,187 |
2.0 |
1,924 |
3.0 |
5,066 |
61.2 |
6,327 |
59.1 |
|
On-Highway................ |
38,007 |
64.7 |
39,802 |
63.0 |
— |
— |
— |
— |
|
Military........................
|
260 |
0.4 |
363 |
0.6 |
9 |
0.1 |
18 |
0.2 |
|
Off-Highway................ |
2,272 |
3.9 |
2,512 |
4.0 |
— |
— |
— |
— |
|
Other.......................... |
0 |
0.0 |
0 |
0.0 |
4 |
0.1 |
3 |
0.0 |
|
|
|
|
|
|
|
|
|
|
|
Total........................... |
58,739 |
|
63,211 |
|
8,273 |
|
10,706 |
|
Notes: Totals may not equal sum
of components due to independent rounding.
Sources: Energy Information Administration Form EIA-821, “Annual Fuel
Oil and Kerosene Sales Report,” for 2004-2008.
On-Highway
Diesel data are
Distillate Fuel Oil
In 2008,
distillate sales fell nearly 4.5 billion gallons countering the long-term trend
of rising sales that has occurred in 12 of the past 16 years. The drop in sales during 2008 exceeded the
magnitude of any previous decline in sales during that time frame.[2] Despite the
size of the overall drop in distillate sales in 2008, sales to the farm sector
and for direct use by oil companies increased somewhat, while sales to all
other sectors fell in comparison to the previous year.
Although the transportation sector
continued to dominate distillate sales, sales dropped throughout the
sector. Overall sales to the
transportation sector slipped by 3.4 billion gallons, nearly 1.8 billion
gallons of the drop was on-highway fuel, but sales to the railroad and bunker
sectors also fell sharply (down 938 million and 737 million gallons
respectively).
The precipitous drop in sales came
about as the result of a number of factors, particularly sharply rising energy
prices during the first half of the year and deteriorating economic conditions
that surfaced during the second half of the year. Economic conditions as measured by Gross
Domestic Product (GDP) grew at a rate of 1.1 percent[3], half the rate of 2007. However, that overall growth masks the severe
economic downturn particularly during the fourth quarter of the year. Spending on new residential construction
dropped by nearly 35 percent, as a result, total spending for private
construction went down by 9.8 percent.
Capacity utilization rates for both the industrial and manufacturing
sectors declined for the first time since 2002, by 0.4 percent and 0.5 percent
respectively. Although total industrial
production rose compared to 2007, the increase of 1.5 percent was the smallest
increase since 2003[4]. The
unemployment rate increased from 4.6 percent to 5.8 percent, the highest rate
since 2003.[5]
Although weather always plays an important role in shaping demand for
distillate fuel, 2008 was not a year with dramatic differences from normal
conditions. The winter was cooler than
in 2007 but only very slightly cooler than normal. While colder winter weather tends to boosts
sales to the residential home heating market, particularly in the
Another factor negatively
impacting distillate sales was the fact that the summer of 2008 was cooler than
the year before, resulting in a reduction in the need for electric utilities to
consume distillate fuel to meet peak summer generation loads. Sales to utilities at the national level fell
approximately 125.7 million gallons (18.8 percent).
Weather plays a major role in
the agricultural sector and in 2008, at the national level the farm sector was
one of only two market sectors to register a gain in distillate sales compared
to the previous year. The growth at the
national level was minimal; sales increased just 9.5 million gallons reflecting
both the economic situation and such weather events at the regional level as
drought, flooding, cold weather, tropical storms and hurricanes. Sales increased in the New England and Middle
Atlantic portions of PAD District 1 (the East Coast), and in PAD District 2
(the Midwest farm belt) and District 5 (the West Coast). However, sales declined in the southern
portion of PAD District 1, which includes
Among the leading crops, the
harvests of soybeans and wheat increased while corn and cotton production were
lower than in 2007. Despite a drop of
some seven percent in corn production, the harvest was still the second highest
on record, bolstered in part by the requirement to add ethanol to gasoline.[7]
Aided by less severe weather
conditions and especially by record high prices during the first half of the
year, distillate sales for oil company use surged. In 2008, weather did not play a major role in
influencing oil company use despite the fact that there was a very active
tropical cyclone season including for the first time, six consecutive tropical
cyclones to make landfall on the
In addition, for the second
year in a row, higher energy prices spurred exploration and development activities
increasing sales nationally by more than 20 percent. The number of drilling rigs in operation, an
important measure of oil company activity, increased by 6.6 percent compared to
2007[8]. The number of working rigs increased each
month until December when the number dipped slightly reflecting changing
economic conditions and lower prices for oil and petroleum products. Although distillate sales to oil companies
jumped by nearly 28 percent, not all regions experienced gains. Sales dropped slightly on the East Coast and
were essentially unchanged on the West Coast.
However, spurred by both high prices and particularly by discoveries and
developments in areas rich in shale deposits, sales to the sector increased
sharply. Sales to oil companies shot up
by 20.6 percent (35.0 million gallons) in the Rocky Mountains and by 39.4
percent (157 million gallons) on the
For the first time since
2004, sales of distillate fuel to the transportation sector fell, dropping in
the aggregate by 3.4 billion gallons.
Nearly 1.8 billion gallons of that drop resulted from reduced demand
from the on-highway sector. Sales of
on-highway diesel fell in all regions of the country. Sales of distillate fuel for use by railroads
also fell in every region. At the
national level, sales to railroads fell by nearly 29 percent, dropping 938
million gallons, compared to a gain of 22 million gallons in 2007. With the exception of the Middle Atlantic
portion of the East Coast, sales of bunker marine fuel, the final component of
transportation sales, also fell, dropping more than 38 percent (737 million
gallons).
In 2008, sales to the
off-highway sector dropped by 240 million gallons, down approximately 9.6
percent. While the drop reflects the
downturn in the economy, it also reflects increased volatility in this market
segment. Sales in 2007 increased by
approximately 34 million gallons plunged by 477 million in 2006, and increased
by 209 million gallons in 2005, accounting for nearly 25 percent of the overall
increase in distillate sales that year.
Nationally, sales to the
commercial sector fell in most regions of the country dropping 146.4 million
gallons (5.4 percent). Sales dropped in
all three sub-regions of the East Coast, falling 241 million gallons (13.4
percent). Sales also fell along the
Nationally, sales to the
industrial sector fell 4.1 percent (100.7 million gallons) reflecting a drop in
industrial production of 2.25 percent and in industrial utilization of 3.72
percent[9]. Regionally, sales of distillate fuel oil to
the industrial sector fell on the East Coast and in the Midwest, dropping 73.0
million gallons (8.6 percent) and 86.0 million gallons (13.0 percent)
respectively, while sales increased somewhat in the Rocky Mountains, on the
Dropping 103.0 million
gallons (28.4 percent), distillate sales to the military fell for the first
time since 2005. On a regional basis, sales fell in the Midwest,
Residual Fuel Oil
Reflecting both the long term
trend of declining sales of residual fuel oil and the adverse economic
conditions that affected sales of petroleum products in general during 2008,
overall sales of residual fuel fell by 22.7 percent (2.4 billion gallons). Sales fell to all market segments with the
exception of oil company use and the miscellaneous “other” category. Reflecting the volatility of the residual
fuel oil market, by far the largest drops in sales were in the bunker and
electric utility sectors, while in 2007, the sales increases were concentrated
in those two sectors.
Sales of bunker fuel
continued to represent the largest share of the residual fuel oil sales market (61.2
percent). The drop in sales of bunker
fuel in 2008 exceeded the falloff in
sales to all other market segments combined accounting for 52 percent of
the total drop in sales (1.26 billion gallons).
The next largest decrease was 948 million gallons to the electric
utility market. There were also sizeable
drops in sales to the commercial and industrial sectors down (77.7 million
gallons and 153.4 million gallons respectively).
Over the past decade, overall
sales of residual fuel oil have fallen by more than 40 percent. However, despite the downward trend, the
period has been characterized by extreme volatility with precipitous swings in
the volume of sales, particularly with respect to the electric utility sector. Beginning in 1998, annual sales to the
electric power sector have fallen by at least one billion gallons three times
but have increased by at least one billion gallons four times. Sales fell by 1.4 billion gallons in 1999,
2.1 billion gallons in 2002, and 3.3 billion gallons in 2006. Sales increased by 1.8 billion gallons in
1998, 1.3 billion gallons in 2001, 1.7 billion gallons in 2003, and 1.1 billion
gallons in 2005.
The high degree of volatility
is a reflection of changes in the electric power sector, weather conditions,
the pricing structure of residual fuel oil and competing fuels, as well as
other factors affecting the production and sales of residual fuel in
general.
In 2005, prompted in part, by
the high price of natural gas, and by constrained natural gas availability following
the hurricane related damage to production and distribution facilities, there
is evidence that concern over the supply of natural gas led to an increased use
of oil and less emphasis on natural gas in at least one region of the country.[10]
However, in 2006, while the
price of residual fuel to the electric power sector increased by 12.9 percent
the price of natural gas to the sector fell by 15.7 percent.[11] Consequently, rising oil prices coupled with
lower prices for a major competing fuel and the warmer than normal winter
contributed to the very large drop of 3.3 billion gallons that year.
In 2007, the cool winter
early in the year, helped boost sales and offset at least in part the rising
fuel oil prices, particularly in November and December. In addition, the price of residual fuel used
by electric utilities in 2007 increased by 7.9 percent on an annual basis,
while the price of natural gas went up only by 2.3 percent. This compares to the situation in 2006, when
residual fuel oil increased by 11.2 percent and natural gas prices dropped by
15.5 percent compared to 2005.[12] Consequently, sales to the electric power
sector increased by 5.6 percent compared to a drop of 56.5 percent in
2006.
In 2008, the unprecedented
spike in petroleum prices coupled with the rapid development of natural gas
production from such shale deposits as Haynesville, Barnett, and Marcellus
contributed to the drop in sales of nearly 36 percent. Consequently, total sales to the utility
sector fell to less than 2 billion gallons for the first time.
Although the overall trend is
down, the potential for some level of fluctuation in the amount of fuel sold
remains possible whenever interruptible gas contracts take effect during the
coldest winter periods and whenever price differentials make switching
attractive. Fluctuations can occur
either in the short-term or when prolonged higher prices of either residual
fuel or natural gas make fuel switching attractive for the relative few with
the ability to switch.
Nonetheless, the principle
reasons for the decline in sales of residual fuel oil remain, changing crude
oil specifications and the enhanced refinery sophistication resulting in
increased production of gasoline and distillate at the expense of heavier
products such as residual fuel oil. In
addition, environmental constraints and restrictions on fuel oil use, and the
availability of abundant relatively inexpensive natural gas have contributed to
a diminished use of residual fuel oil in general and its use in the production
of electric power in particular.[13]
Kerosene
For the third year in a row,
kerosene sales dropped sharply. Total
sales of kerosene fell to 274 million gallons, plunging by 55.6 percent,
following a drop of 330 million gallons in 2007 and a 247 million gallon loss
in 2006. Kerosene sales have plunged by
80 percent since 2005 bringing them to the lowest total in more than 25
years. Sales of kerosene fell to all
market segments with the largest drop occurring in the residential sector where
sales fell by 167.6 million (51.5 percent).
Sales to the residential
sector fell without exception in all regions of the country with the largest
declines occurring along the East Coast from New England to
Sales to both the commercial
and industrial sectors also fell in all regions of the country dropping by 36.3
million gallons (53.4 percent) and 65.2 million gallons (73.8 percent)
respectively at the national level. In
the commercial sector, the largest drop in sales occurred in the
Sales to the farm sector also
fell in every region dropping by 45.8 percent nationally. The region with the largest drop in sales was
the
Figure HL1. U.S.
*For distillate fuel oil,
transportation use comprises railroad, vessel bunkering, and on-highway diesel
energy use categories. For residual fuel
oil, transportation use comprises vessel bunkering energy use category.
Source: Energy Information
Administration, Form EIA-821, “Fuel Oil and Kerosene Sales Report,” 2007 and
2008.
Figure HL2. Volume Distribution
of Distillate and Residual Fuel Oils by PAD District, 2006-2008
*Residual
fuel oil sales in PAD District 4 are too small to appear in the graph.
Source:
Energy Information Administration, Form EIA-821, “Fuel Oil and Kerosene Sales
Report,” 2007 and 2008.
Figure HL3. Distillate and Residual Fuel Oil
Sales for Selected Energy Use Categories by PADD District, 2008
*Residual
fuel oil sales in PAD District 4 are too small to appear in the graph.
Source:
Energy Information Administration, Form EIA-821, “Fuel Oil and Kerosene Sales
Report,” 2008.