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It’s all going up in smoke.
Back in January, the Energy Information Administration forecast Americans would burn 8.71 million barrels of gasoline a day in the first quarter. They actually used 100,000 more than that to drive a record 720.1 billion miles. That’s about 3,900 return trips to the sun.
The thirst for fuel in the U.S. and abroad has been greater than analysts, including the EIA and Energy Aspects Ltd., estimated. It’s pushed pump prices beyond forecasts and extended the good times for America’s refiners who, thanks to the shale- drilling boom, are gorging on a type of crude easily refined into gasoline.
“The speed at which demand picked up surprised a lot of people, including even ourselves,” Robert Campbell, an analyst at Energy Aspects, a London-based consulting company, said by phone June 11. “We have been very positive on demand from the get-go and we were still a bit surprised by how quickly it came on.”
Retail gasoline in the U.S. rose 16 percent in the past two months to $2.802 a gallon on June 16, near the highest since November, data compiled by Heathrow, Florida-based AAA show. The motoring group projected in May that average prices would range from $2.55 to $2.75 this summer.
More Driving
More drivers are taking road trips this summer and commuting to the office after the U.S. added 3.1 million jobs last year, the most since 1999.
Gasoline is still almost a dollar below year-ago levels as a flood of low-density oil drawn from shale formations with hydraulic fracturing makes producing fuel cheaper. Refiners used the lightest crude in March since April 1991. Lighter oil tends to yield more gasoline than heavy crude like the bitumen from Canada’s oil sands.
U.S. benchmark West Texas Intermediate crude sank 5 cents on Wednesday to settle at $59.92 a barrel on the New York Mercantile Exchange. The grade is down 44 percent from a year ago.
Refining margins have widened so much that plants are delaying shutdowns and repairs until next year. The profit from turning three barrels of Light Louisiana Sweet crude into two of gasoline and one of diesel has averaged $15.53 a barrel this month, $4.18 more than a year ago.
Declining Supply
Inventories of gasoline have dropped 10.5 million barrels in the past five weeks, despite the increase in refining rates. There’s enough fuel to cover 23.1 days of demand, the lowest for this time of year since 2012, according to EIA data.
Gulf Coast plants used the most crude on record in the week ended June 2. Planned outages from June through August will be about 200,000 barrels a day less than the past two years, according to data compiled by Bloomberg.
Motiva Enterprises LLC delayed repairs at its Port Arthur refinery, the biggest in the U.S., to the first quarter of next year. BP Plc’s Whiting complex in Indiana put off a maintenance turnaround until next year.
“It would behoove any refinery manager to defer maintenance,” Campbell of Energy Aspects said.
Refiners aren’t running at almost 95 percent of their capacity just to meet a surge in U.S. demand. Gasoline exports were up 9.2 percent in the first quarter from a year earlier.
Improving Economy
Adding to increasing fuel consumption are Americans returning to work and burning more gasoline during their daily commutes. So is the improving construction market, with new home sales in the U.S. rising more than projected in April, Philip Verleger, an energy consultant, said by phone on June 12.
Demand is increasing as drillers are retreating from U.S. oil fields in response to the collapse in crude prices in the second half of last year. The retrenchment is beginning to spur reductions in crude production that, along with higher consumption, may drive prices to as high as $80 a barrel by the end of the year, said Verleger, president of the economic consulting company PKVerleger LLC in Carbondale, Colorado.
“What I’m seeing now is consistent with a tightening market and not one where there’s a surplus,” he said.
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--With assistance from Rupert Rowling and Bill Lehane in London, Mark Shenk and Christine Harvey in New York, Barbara Powell in Houston and Shobhana Chandra in Washington.