1	Meeting U.S. Transportation Fuel Demand John Hackworth Joanne Shore Energy Information Administration Energy & Transportation Panel August 2004
2	Capacity Surplus Disappearing, Creating Short-Term Challenge
3	Overview Transportation demand growth – some uncertainties A need for both U.S. capacity & import growth New U.S. product specifications limit import sources Will gasoline import availability grow?
4	Demand – A Crucial Factor Affecting Capacity Decisions Future growth forecasts What could affect future growth?
5	Transportation Demand Growth Drives EIA’s Reference Case
6	Efficiency Could Affect Demand, But How Quickly?
7	Historical Efficiencies Affected Demand Relatively Quickly
8	Role of Gasoline Imports – Now and in the Future Historically, imports have been an essential supply source Need increased import volume in future Will import supply be available? Why imports have been a competitive supply source Future impacts of U.S. specification changes The impacts of international supply/demand
9	Imports Have Been Economic
10	Gasoline Net Imports – An Essential Supply Source
11	Import Sources Nearby dedicated suppliers Canada Virgin Islands Venezuela Nearby economic sources Western Europe – symbiotic relationship Eastern Europe Latin America Africa Other incremental supply Middle East and Asia
12	EU-15 Demand Mix May Imply Excess European Mogas Supply
13	European Choices of New Vehicles Show Why Diesel Fuel Growth May Continue
14	EU Hydrocracking Growing, But Not as Fast as Mogas/Diesel Demand Shift
15	No Change in NWE Price Incentive for Diesel over Gasoline
16	2004 Specification Effects on Summer Imports into New York/New Jersey
17	Changing U.S. Sulfur Specifications May Change Import Sources
18	Some Historical Suppliers Cannot Produce Low Sulfur Gasoline
19	Shifts in Gasoline Import Sources with Changes to Lower Sulfur Gasoline
20	Gasoline Import Availability Stable or Increasing W. Europe gasoline/diesel imbalance continues Increased E. Europe export capability Dedicated U.S. import sources remain Potentially high U.S. gasoline margins Decreasing U.S. gasoline spec changes limit supply sources in short run Demand outside U.S. growing faster than refining capacity
21	Factors Affecting International Product Supplies High world demand growth Increases capacity utilization (especially Asia) Supports high crude oil prices Increasing imports and product prices Import implications of world refining capacity utilization Asian demand rebound and China’s growth Capacity growth lagging Ability to produce light clean products in non-OECD areas
22	Annual Demand Changes Vary Considerably
23	How Tight is World Refining Capacity? Recent claims of being maximum sustainable capacity are exaggerated Comparing world product demand and capacity can be misleading Must look at regional utilizations However, demand growth is outpacing capacity growth – for the moment
24	Overview of World Capacity Utilization (Percent Gross Inputs/Distillation)
25	U.S. and Western European Trends
26	Singapore Utilization Pattern
27	Downstream Capacity Profiles
28	Capacity Additions – Asia & M.E.
29	Capacity Additions – Europe & U.S.
30	Refining Margin Comparisons
31	Looking Ahead 3-5 Years: Capacity Growth Less Than Demand Growth Capacity lagged demand for past 5 years Forecasted gasoline demand implies the need for 1 to 2 MMB/D of added capacity in the next 5 years. Improved margins will encourage capacity But other environment investment requirements may detract New product specifications reduce yield in short term
32	Looking Ahead 3-5 Years: Import Availability Still A Question While the need for product imports increases, changing U.S. specifications may reduce the number of import sources in the short term Some changes were met this year, but future specifications more stringent. Worldwide refinery utilization increases will have little impact on U.S. import availability
33	Conclusion Petroleum demand will likely increase over the near term. Increases in both U.S. capacity and product imports will be needed However, the balance between the 2 supply sources is uncertain Both capacity expansion and import growth face large challenges