Less petroleum and other liquids consumed in the U.S. is coming from refineries
The U.S. Energy Information Administration’s (EIA) latest Short-Term Energy Outlook (STEO) forecasts that in 2021, U.S. consumption (as measured by product supplied) of total petroleum and other liquid fuels will average 20.71 million barrels per day (b/d), surpassing the 2007 pre-recession level. However, since the 2007–09 recession, the fastest-growing components of U.S. liquids consumption growth have not been fuels such as motor gasoline or distillate fuel but rather hydrocarbon gas liquids (HGLs) and ethanol—two components that are mostly or almost entirely produced outside of petroleum refineries. Petrochemical facilities consume HGLs as feedstocks in the growing production of plastics, resins, and other materials, and ethanol is blended with gasoline.
HGLs and ethanol consumption have collectively grown from 2.6 million b/d in 2007 to 4.1 million b/d in 2019. The remaining portion of total petroleum and other liquids consumption—nearly all of which comes from petroleum refineries—has fallen from 18.0 million b/d in 2007 to 16.4 million b/d in 2019. In 2021, EIA forecasts that U.S. demand for principally refinery-produced products will average about 16.3 million b/d, similar to its 1997 level.
Hydrocarbon gas liquids—a group of products that includes ethane, propane, normal butane, isobutane, natural gasoline, and refinery olefins—have been the main driver of U.S. petroleum and other liquids demand growth since 2007. Domestic production and consumption of HGLs have increased with rising natural gas production and rising petrochemical sector demand. As a result, EIA forecasts U.S. HGL consumption will average 3.45 million b/d in 2021, or 1.27 million b/d more than in 2007.
Except for jet fuel, EIA expects less U.S. consumption of refinery-produced products in 2021 than in 2007. For example, declines in the use of heating oil for space heating and transportation efficiency gains have limited the increase in distillate consumption in the United States. Consumption of the petroleum-based component of U.S. motor gasoline has yet to surpass pre-recession levels because of increased vehicle fuel efficiency and increased blending of ethanol, which is almost exclusively produced outside of petroleum refineries. EIA forecasts that the United States will consume 0.57 million b/d less refinery-produced gasoline in 2021 than in 2007, but ethanol consumption will be 0.49 million b/d higher.
Some HGLs can be produced by both crude oil refineries and natural gas processing plants. HGL production at natural gas processing plants has risen along with U.S. natural gas production. EIA expects HGL production from natural gas processing plants to continue to increase to 5.5 million b/d in 2021. Meanwhile, refinery HGL production has remained flat in recent years at about 0.6 million b/d.
The large increase in U.S. HGL production and the resulting low prices have led to large investments in U.S. infrastructure to extract and transport HGLs to market and investments in petrochemical facilities to consume HGLs. Many of these facilities consume HGLs as feedstocks in the production of plastics, resins, and other materials.
Principal contributor: Mason Hamilton