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Petroleum & Other Liquids

This Week in Petroleum

Release date: January 22, 2021  |  Next release date: January 27, 2021

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EIA releases methods for estimating and forecasting global oil consumption

As a supplement to its January 2021 Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) released an analysis discussing developments in global oil consumption in 2020 and how they affect EIA’s forecasts for 2021 and 2022. Preliminary data and estimates indicate that global consumption of liquid fuels declined by 9.0 million barrels per day (b/d) in 2020, the largest annual decline in EIA data since at least 1980. EIA forecasts that global consumption of liquid fuels will rise by 5.6 million b/d in 2021 and 3.3 million b/d in 2022. The expected rise in liquid fuels consumption results from forecast growth in global gross domestic product (GDP) as well as a movement toward pre-pandemic levels of travel and other petroleum use, particularly in late 2021 and in 2022.

In estimating and forecasting global oil consumption, EIA relies on historical monthly consumption numbers in combination with different models. Real-time data about oil consumption outside of the United States is not available. In its Weekly Petroleum Status Report, EIA uses product supplied as a proxy for domestic oil demand. Other countries in the Organization for Economic Cooperation and Development (OECD) provide monthly consumption data after a two- to three-month lag, and non-OECD countries’ data can vary from a two- to three- month lag to a year or more. As a result, EIA will have nearly finalized data on about half of world oil consumption for 2020 by the first quarter of 2021, including final numbers from the United States; OECD countries; and some non-OECD countries, including India and Brazil. EIA will add finalized data to its published estimates for full-world 2020 as they become available throughout 2021 and 2022.

EIA normally forecasts growth in global oil consumption in two separate forecasts—a U.S. petroleum consumption forecast and a world oil consumption forecast that excludes the United States (world ex-U.S.). EIA develops the U.S. petroleum consumption forecast on a fuel-by-fuel basis. EIA forecasts changes in U.S. petroleum consumption in response to variables including economic growth, employment growth, vehicle fleet fuel efficiency, oil prices, and other variables.

EIA’s forecast of growth in world ex-U.S. oil consumption relies on fewer variables. The forecast uses a combination of available real-time data and models based on the relationship between GDP and oil consumption. EIA uses an average of two individual models:

  • A regression model that uses forecast GDP growth (from Oxford Economics) and oil price as the two main variables
  • An energy intensity of GDP model that forecasts oil consumption based on a continuation of recent trends in oil consumption per unit of economic output

EIA runs the models for 24 countries and regional groups. As a starting point for its forecast, EIA averages the results of these two models and then applies other oil market-specific factors to modify a country’s or region’s consumption forecast. Typically, the factors specific to oil consumption are limited and include things such as new petrochemical plant construction that would increase petroleum consumption beyond what the modeled results alone would explain.

As a result of the uncertainty surrounding worldwide responses to COVID-19 in 2020, EIA relied on a wide set of other indirect indicators to assess oil demand, including third-party indexes that tracked mobility, flights, and government stay-at-home orders and the stringency of these orders across countries. EIA used this method because the declines in petroleum consumption during 2020 stemmed from two major sources. The first of these two sources was the slowdown in economic activity as countries entered recession. Similar to past recessions, a decline in GDP affects many economic sectors. Cross-sector declines in economic activity typically reduce diesel fuel demand more than demand for other fuels because of reduced shipping. Gasoline consumption is more closely tied to employment than overall economic activity.

In 2020, however, the effects of restricted travel on overall oil consumption, the second source of declines, were more pronounced than what they may have been during an otherwise normal business cycle recession, which would have only reduced economic activity. In the United States, gasoline consumption fell as a result of employees and students working or studying from home. In addition, diesel consumption initially declined by less than gasoline and jet fuel consumption because an increase in online retail sales resulted in increased shipping activity that may have offset declines in other uses of diesel. Data from the International Energy Agency show similar trends in other OECD countries.

Because oil consumption did not follow the usual pattern for an economic recession, estimating oil consumption totals became more challenging. As a result, even in May and June, the extent of consumption declines in April were unknown, and to some extent they are still unknown. EIA initially forecast larger declines in oil consumption than actually occurred—in the May STEO, EIA estimated April 2020 world oil consumption declined to 76.3 million b/d, which EIA subsequently revised to 80.6 million b/d as OECD countries and some non-OECD countries released oil consumption data.

EIA forecasts that some mandatory and voluntary travel restrictions will still be in place in the first half of 2021 amid a resurgence in COVID-19 cases, although the level of restrictions and their duration is highly uncertain. EIA forecasts that a return to more normal consumer behavior and a continued recovery in GDP will contribute to rising oil consumption in 2021 as the year progresses, growing by 5.6 million b/d (6%) in 2021. EIA forecasts that the United States will account for 1.4 million b/d of that growth and that the rest of the world will account for 4.1 million b/d (Figure 1).

Figure 1. World liquid fuels concumption year-over-year change

Oil consumption will grow in 2021 because of both economic growth and a return to more normal travel patterns by the middle of the year, which will also have a small effect on oil consumption growth in 2022. Despite the forecast increases in 2021, EIA still expects global oil consumption to average 97.8 million b/d, 3% less than the 2019 level. For 2022, EIA forecasts global consumption of petroleum and other liquids will grow by 3.3 million b/d (3%). EIA forecasts that the United States will account for 1.0 million b/d of that growth and the rest of the world will account for the remaining 2.3 million b/d. The 2022 world ex-U.S. forecast is mostly the result of EIA’s model output as the effects of travel restrictions and other behavioral changes lessen.

U.S. average regular gasoline and diesel prices increase

The U.S. average regular gasoline retail price increased more than 6 cents to $2.38 per gallon on January 18, 16 cents lower than the same time last year. The Gulf Coast price increased nearly 10 cents to $2.11 per gallon, the Midwest price increased more than 6 cents to $2.28 per gallon, the West Coast price increased 6 cents to $2.91 per gallon, the East Coast price increased more than 5 cents to $2.35 per gallon, and the Rocky Mountain price increased nearly 3 cents to $2.24 per gallon.

The U.S. average diesel fuel price increased nearly 3 cents to $2.70 per gallon on January 18, 34 cents lower than a year ago. The Gulf Coast price increased more than 3 cents to $2.46 per gallon, the East Coast and Midwest prices each increased nearly 3 cents to $2.75 per gallon and $2.63 per gallon, respectively, the West Coast price increased nearly 2 cents to $3.16 per gallon, and the Rocky Mountain price increased more than 1 cent to $2.60 per gallon.

Propane/propylene inventories decline

U.S. propane/propylene stocks decreased by 6.2 million barrels last week to 59.8 million barrels as of January 15, 2021, 7.1 million barrels (10.6%) less than the five-year (2016-2020) average inventory levels for this same time of year. Gulf Coast, Midwest, East Coast, and Rocky Mountain/West Coast inventories decreased by 3.0 million barrels, 1.9 million barrels, 1.2 million barrels, and 0.1 million barrels, respectively.

Residential heating fuel prices increase

As of January 18, 2021, residential heating oil prices averaged more than $2.56 per gallon, 6 cents per gallon higher than last week’s price but more than 51 cents per gallon lower than last year’s price at this time. Wholesale heating oil prices averaged nearly $1.71 per gallon, almost 2 cents per gallon above last week’s price but more than 25 cents per gallon below last year’s price.

Residential propane prices averaged more than $2.18 per gallon, more than 10 cents per gallon higher than last week’s price and 18 cents per gallon above last year’s price. Wholesale propane prices averaged more than $1.17 per gallon, 16 cents per gallon higher than last week’s price and nearly 57 cents per gallon above last year’s price.

For questions about This Week in Petroleum, contact the Petroleum Markets Team at 202-586-4522.

Tags: consumption/demand , COVID-19 , international , oil/petroleum , STEO (Short-Term Energy Outlook)

Retail prices (dollars per gallon)

Retail price graphs
  Retail prices Change from last
  01/18/21 Week Year
Gasoline 2.379 0.062 -0.158
Diesel 2.696 0.026 -0.341
Heating Oil 2.564 0.060 -0.511
Propane 2.184 0.103 0.180

Futures prices (dollars per gallon*)

Futures price graphs
  Futures prices Change from last
  01/15/21 Week Year
Crude oil 52.36 0.12 -6.18
Gasoline 1.528 -0.014 -0.113
Heating oil 1.593 0.013 -0.266
*Note: Crude oil price in dollars per barrel.

Stocks (million barrels)

Stock price graphs
  Stocks Change from last
  01/15/21 Week Year
Crude oil 486.6 4.4 58.5
Gasoline 245.2 -0.3 -14.8
Distillate 163.7 0.5 17.6
Propane 59.818 -6.230 -20.763