|SHow can we test the world refining capacity
limit theory? There are several ways.
|SDid we see dramatic imbalances and price
|–In the past decade, refinery utilization in
the U.S. and Europe has been high.
Occasionally, surges in demand have exceeded supply for short periods
(1-2 months). During these times,
inventories dropped much more rapidly than normal. During such times, product prices spiked
relative to crude oil prices. That did
not occur in 2004.
|–Light product inventories (gasoline and
distillate) in the U.S., Europe, and OECD Asia started 2004 at the lower end
of their typical ranges, but no significant draw down occurred relative to
normal seasonal changes. That is,
production of light products from refineries kept up with rising demand.
|SWere there any signs that incremental heavy
crude oil production was not used?
|–As OPEC increased production of heavy sour
crude oil, there was no indication
that this incremental production was not sold or that refiners were unable to
process it. Refinery input rose, and
product demand was met.
|SFinally, was world refining capacity running
at maximum utilization: The next
several slides will look at refinery capacity utilization in 2004 to explore
any indications that world utilization was at its maximum levels.