|SWhy did some analysts assert that we are
out of refining capacity? In some cases, market observers made an
inappropriate comparison of world petroleum demand and world refinery
capacity. Petroleum demand is met by natural gas liquids, other hydrocarbons and
oxygenates that do not depend on refineries.
|–Everyone has been noting the increase in
demand world wide, and in particular the unexpected jump in demand 2004. Along with this increase, we naturally see
increases in refinery utilization, which causes people to check how much
refining capacity remains.
|–A balance of 83 million barrels per day of
refinery capacity against 82 million barrels per day of oil product demand
seems to imply a very tight situation.
But that demand includes products being supplied from outside the
refinery system. For example, the U.S.
has over 20 million barrels per day of demand and only 16.0 million barrels
per day of refinery inputs plus 1.4 million barrels per day of product
imports. Gas liquids and other
hydrocarbons and oxygenates contribute more than 10 percent of supply volume.
|SIn order to see a reasonable picture of
refinery utilization on a global scale and how that utilization might affect
U.S. markets, it is necessary to look at regional refinery markets.
|SHowever, while our view is more
restrained than some other analysts that believe world refining capacity
utilization is at its maximum, we agree that product demand is growing
faster than refinery capacity in recent years, and the situation could become
even tighter if high demand growth continues.