Released on August 7, 2002
(Next Release on August 14, 2002)

First Impressions
With EIA weekly data indicating that total petroleum demand in July averaged 19.7 million barrels per day, it appears, upon first impression, that it was 1.2 percent below the very high level last July when compared to final data. But when compared to similar weekly data collected last July, it is only 0.1 percent lower. When the final data is released for July 2002, it may turn out that demand was flat or even slightly higher than last year. And this is with jet fuel demand continuing to lag year-ago levels due to fewer flights and less air travel following the attacks last September 11. Furthermore, while averaging nearly 8 percent less than year-ago levels, July jet fuel demand rose to its highest level since the attacks. It will be interesting to see if it continues to increase in coming months, proving that a gradual recovery in this sector is occurring. Meanwhile, motor gasoline demand in July averaged nearly 9.1 million barrels per day according to EIA’s weekly data, which is about 0.7 percent above the final July 2001 data (and 1.0 percent above the weekly data for July 2001), showing continued strength in gasoline demand. With total petroleum demand in August 2001 averaging nearly 20.2 million barrels per day, an historically high and possibly insurmountable level, demand growth this August should not be expected, especially with jet fuel demand still recovering. But this should not be taken at first glance as implying that oil demand in the United States is weak. First impressions can be deceiving.

Iraq Has Not Been A Major Import Source Recently
In 2001, the United States imported 795,000 barrels per day of crude oil from Iraq, ranking Iraq as the 6th largest source of imported crude oil into this country. But over the last 9 weeks, (using weekly data on sources of crude oil imports that is too preliminary to publish actual amounts but does indicate general trends), it appears that Iraqi crude oil imports into the United States have been cut substantially, to possibly less than a third of the average in 2001. Over this period, Iraq has ranked as only the 9th or 10th largest source of imported crude oil. Reasons for the recent large drop in Iraqi crude oil imports include a self-imposed 30-day oil export embargo by Iraq earlier this year as well as reduced exports related to pricing formulas for Iraqi crude oil exported under the United Nations “oil-for-food” program. Regardless of the reasons, it is clear that for most of this year, Iraq has not been a major source of imported crude oil for the United States.

Retail Gasoline and Diesel Fuel Prices
The U.S. average retail price for regular gasoline fell 1.2 cents per gallon last week, ending at 139.5 cents per gallon as of August 5. This price is 1.9 cents per gallon higher than last year, marking the third week in a row this summer that 2002 prices were higher than 2001 prices. Despite the decline in the national average, retail gasoline price changes were up throughout most of the country, with the largest regional increase occurring on the West Coast, where prices gained 0.9 cent to end at 154.1 cents per gallon. In the Midwest, however, prices fell 4.6 cents per gallon to end at 136.9 cents per gallon. This large decrease in the Midwest, a region of the country that consumes about a third of the country’s gasoline, was the reason behind the decline in the national average. Gasoline prices had been moving upwards in the past few weeks, and while there is still potential for some pressure on prices ahead of Labor Day, any significant movement would likely prove to be very brief, barring major regional infrastructure difficulties. Retail diesel fuel prices increased by 0.1 cent per gallon to a national average of 130.4 cents per gallon as of August 5.

Propane Build Falls Short of July Average
U.S. inventories of propane recorded a nearly 5.1 million barrel build during July 2002, although the level fell short of reaching the 5-year July average build of 7.0 million barrels. Despite the relatively weak build, U.S. inventories of propane stood at an estimated 65.1 million barrels as of July 31, 2002, a level that remains slightly above the upper end of the average range for this time of year. Regional stock builds were below the 5-year July average in the East Coast and Midwest regions while the Gulf Coast reported an above average build during the same month. Below average stock builds in the Midwest region over the summer has pushed inventories to near the lower limit of the average range by July 2002, while inventories in the East Coast and Gulf Coast regions remain above their respective average ranges during this same period.

Next Propane Inventory Release
Propane inventory data for August 31, 2002, will be published in the September 11, 2002 issue of “This Week In Petroleum.”