Petroleum and Natural Gas Situation John C. Felmy Chief Economist and Director Statistics Department American Petroleum Institute Felmyj@api.org www.api.org www.gasolineandyou.org www.naturalgasfacts.org 1
EIA Forecast of Winter Fuel Costs October 2
EIA History and Forecast of Winter Fuel Costs Winter Heating Bills - EIA - October $1,600 $1,400 1348 1396 $1,200 1147 1223 Per Heating Season $1,000 $800 $600 999 943 953 870 1003 Natural Gas Heating Oil Propane $400 $200 $0 1996-1997 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002 2002- - -2005 3
NOAA Winter Outlook 4
Déjà vu, All Over Again Early Cold winter Venezuela shutdown Nigerian strikes Iraq High crude oil prices California MTBE ban transition start Summer Blackout Pipeline problems Strong demand Japanese nuclear outages OPEC cuts Cold winter Japanese nuclear outages Venezuela uncertainty Iraq uncertainty Nigerian uncertainty Terrorist attacks Norwegian Strikes Yukos Strong economic growth Dollar depreciation High crude oil prices High natural gas prices Lower sulfur gasoline California finishes MTBE ban transition Mississippi river accident Refinery outages Strong gasoline demand NY/CT MTBE bans Hurricanes 5
31-Dec Crude oil futures prices - NYMEX Crude Oil Prices,, 2002 - NYMEX 1.3000 1.2000 1.1595 $48.70 1.1000 1.0000 0.9000 0.8000 1.0079 1.0029 0.8490 $35.66 0.7000 0.6000 0.5000 0.4000 1.2771 $53.64 6 22-Oct 5-Nov 19-Nov 3-Dec 17-Dec 8-Oct 2002 2002 1-Jan 15-Jan 29-Jan 12-Feb 26-Feb 12-Mar 26-Mar 9-Apr 23-Apr 7-May 21-May 4-Jun 18-Jun 2-Jul 16-Jul 30-Jul 13-Aug 27-Aug 10-Sep 24-Sep Crude Oil - NYMEX - quotes.ino.com $ per gallon
17-Dec 31-Dec Futures price gasoline - NYMEX NYMEX Gasoline Prices, and 2002 1.5000 1.4000 1.3000 1.4578 1.3278 1.3468 1.2000 1.1000 1.1288 1.0585 1.1243 1.0000 0.9000 0.8000 0.7000 0.6000 0.5000 1.4050 7 3-Dec 22-Oct 5-Nov 19-Nov 2002 2002 1-Jan 15-Jan 29-Jan 12-Feb 26-Feb 12-Mar 26-Mar 9-Apr 23-Apr 7-May 21-May 4-Jun 18-Jun 2-Jul 16-Jul 30-Jul 13-Aug 27-Aug 10-Sep 24-Sep 8-Oct $ per gallon
17-Dec 31-Dec Gasoline - Retail Regular Gasoline Prices versus 2002 Source: AAA 2.000 1.800 2.054 1.920 1.884 1.879 1.859 1.837 1.600 1.400 1.200 1.000 1.972 8 3-Dec 22-Oct 5-Nov 19-Nov 2002 2002 1-Jan 15-Jan 29-Jan 12-Feb 26-Feb 12-Mar 26-Mar 9-Apr 23-Apr 7-May 21-May 4-Jun 18-Jun 2-Jul 16-Jul 30-Jul 13-Aug 27-Aug 10-Sep 24-Sep 8-Oct Source: Retail Gasoline - AAA -www.fuelgaugereport.com $ per gallon
The crude oil and gasoline roller coaster Gasoline Prices $2.000 Retail Regular - AAA 5/26/04 $2.054 10/11/04 $1.972 3/17/03 $1.722 8/29/03 $1.737 Dollars per Gallon $1.500 $1.000 $0.500 $0.000 11/1/2002 6/2/03 $1.475 12/13/02 $1.371 3/12/03 $0.9007 ($37.83 per bbl) 4/29/03 $0.6010 ($25.24 per bbl) NYMEX WTI 12/1/2002 1/1/ 2/1/ 3/1/ 4/1/ 5/1/ 6/1/ 7/1/ 8/1/ 9/1/ 10/11/04 $1.2771 ($53.64 per bbl) 81 8/26/04 $1.1595 ($48.70 per bbl) 12/16/03 $1.470 6/1/04 $1.0079 ($42.33 per bbl) 3/17/04 $0.9090 ($38.18 per bbl) 9/22/03 $0.6419 ($26.96 per bbl) 10/1/ 11/1/ 12/1/ 6/29/04 $0.8490 ($35.66 per bbl) Source: Retail Gasoline - AAA -www.fuelgaugereport.com, Crude Oil - NYMEX - quotes.ino.com 1/1/ 2/1/ 3/1/ 4/1/ 5/1/ 6/1/ 7/1/ 8/1/ 9/1/ 10/1/ 9
Crude oil and gasoline prices from lows to highs $2.50 May 24, $2.06 $2.00 Jun 19, 2000 May 28, 2001 $1.68 $1.70 Mar 14, $1.73 Aug 25, $1.75 Price per Gallon $1.50 $1.00 Feb 22, 1999 $0.91 Mar 6, 2000 $34.13/Barrel Sep 18, 2000 $37.20/Barrel Dec 17, 2001 $1.06 Jun 2, $1.47 Mar 14, $37.83/Barrel Dec 15, $1.47 $1.239 Oct 6, $0.50 $0.00 Feb 22, 1999 $11.76/Barrel Nov 19, 2001 $17.45/Barrel May 5, $25.24/Barrel Jan-99 Apr-99 Jul-99 Oct-99 Jan-00 Apr-00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Crude Oil (NYMEX) Regular Gasoline (EIA) 10
Diesel and crude oil prices Diesel and Crude Oil Prices 10/11/04 $2.115 $2.00 3/14/03 $1.829 12/17/02 $1.462 8/28/03 $1.583 5/26/04 $1.831 $1.50 7/6/04 $1.772 10/11/04 $1.2771 ($53.64 per bbl) 3/12/03 $0.9007 ($37.83 per bbl) 7/ 7/ 03 $1.509 11/ 13/ 02 $0.5998 ($25.19 per bbl) 8/26/04 $1.1595 ($48.70 per bbl) 6/1/04 $1.0079 ($42.33 per bbl) $1.00 $0.50 6/29/04 $0.8490 ($35.66 per bbl) 4/29/03 $0.6010 ($25.24 per bbl) 9/22/03 $0.6419 ($26.96 per bbl) $0.00 Source: Retail Gasoline - AAA -www.fuelgaugereport.com, Crude Oil - NYMEX - quotes.ino.com 11
Year to date the refineries have produced record amounts of gasoline Gasoline production 9000 8500 8000 Average 99-03 7500 7000 12 Thousand barrels per day 1/2 1/16 1/30 2/13 2/27 3/12 3/26 4/9 4/23 5/7 5/21 6/4 6/18 7/2 7/16 7/30 8/13 8/27 9/10 9/24 10/8 10/22 11/5 11/19 12/3 12/17
Gasoline imports have increased significantly and are now at record levels Total Gasoline Imports 1400 1200 1000 Average 99-03 800 600 400 13 Thousand barrels per day 1/2 1/16 1/30 2/13 2/27 3/12 3/26 4/9 4/23 5/7 5/21 6/4 6/18 7/2 7/16 7/30 8/13 8/27 9/10 9/24 10/8 10/22 11/5 11/19 12/3 12/17
Gasoline inventories Inventories listed in millions of barrels. Week Ending October 1 Week Ending September 24 Total Gasoline Inventories Change from September 24 to October 1 Year Ago* () Change from to 1999- Average** Change from 1999- Average National 199.3 202.7-1.7% 196.8 1.3% 202.9-1.8% East Coast 51.6 54.1-4.5% 52.9-2.5% 54.8-5.8% New England 4.3 4.9-12.1% 3.9 12.0% 4.0 8.2% Mid-Atlantic 27.0 29.4-8.0% 25.5 6.0% 27.7-2.5% South Atlantic 20.3 19.8 2.5% 23.6-14.0% 23.0-12.1% Midwest 50.7 50.5 0.5% 48.9 3.7% 51.7-2.0% Gulf Coast 58.7 60.4-2.9% 59.8-2.0% 61.1-3.9% Mountain 5.9 5.6 5.6% 6.1-3.3% 6.1-2.3% West Coast 32.4 32.1 0.9% 29.0 11.5% 29.3 10.6% 14
9.800 8.800 7.800 6.800 5.800 4.800 3.800 2.800 1.800 Natural gas prices have been above year ago levels Natural Gas Prices,, 2002 - NYMEX 7.255 6.993 15 $ per mmbtu 1-Jan 15-Jan 29-Jan 12-Feb 26-Feb 12-Mar 26-Mar 9-Apr 23-Apr 7-May 21-May 4-Jun 18-Jun 2-Jul 16-Jul 30-Jul 13-Aug 27-Aug 10-Sep 24-Sep 8-Oct 22-Oct 5-Nov 19-Nov 3-Dec 17-Dec 31-Dec 2002 2002
Natural gas in storage record level for time of year Natural Gas Storage 3500 3254 3092 3000 2500 2000 1500 1000 1014 500 0 2619 min 94-03 max 94-03 Average 94-03 16 17-Dec 2-Jan 16-Jan 30-Jan 13-Feb 27-Feb 12-Mar 26-Mar 9-Apr 23-Apr 7-May 21-May 4-Jun 18-Jun 2-Jul 16-Jul 30-Jul 13-Aug 27-Aug 10-Sep 24-Sep 8-Oct 22-Oct 5-Nov 19-Nov 3-Dec BCF 3/14/03 654 4/11/03 642
1,200 1,000 800 600 400 200 0 Rigs drilling for natural gas have increased to record levels US Natural Gas Rig Counts - Baker Hughes 17 5/4/ 1/4/1999 3/4/1999 5/4/1999 7/4/1999 9/4/1999 11/4/1999 1/4/2000 3/4/2000 5/4/2000 7/4/2000 9/4/2000 11/4/2000 1/4/2001 3/4/2001 5/4/2001 7/4/2001 9/4/2001 11/4/2001 1/4/2002 3/4/2002 5/4/2002 7/4/2002 9/4/2002 11/4/2002 1/4/ 3/4/ 5/4/ 7/4/ 9/4/ 11/4/ 1/4/ 3/4/ 7/4/ 9/4/ 7/9/01 = 1068 10/8/04 = 1060 5/17/02 = 725 11/1/02 = 673 3/29/02 = 591 4/19/99 = 362
EIA natural gas production and demand forecast Natural Gas Forecast EIA - October Production Demand 6.0 4.8 4.0 3.5 Percent Change 2.0 0.0-2.0 1.9 2.3 2.0 1.5 1.0 0.7 0.6 0.3 1998 1999 2000 2001 2002 2005-1.0-1.0-2.1-4.0-3.4-6.0-5.3-4.6 18
Propane in storage 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 Propane Stocks Min 94-02 Max 94-02 Average 94-02 19 Thousand Barrels 2-Jan 16-Jan 30-Jan 13-Feb 27-Feb 12-Mar 26-Mar 9-Apr 23-Apr 7-May 21-May 4-Jun 18-Jun 2-Jul 16-Jul 30-Jul 13-Aug 27-Aug 10-Sep 24-Sep 8-Oct 22-Oct 5-Nov 19-Nov 3-Dec 17-Dec
1.0000 0.9000 0.8000 0.7000 0.6000 0.5000 0.4000 0.3000 0.2000 NYMEX propane futures prices are at or near record levels Propane Prices,, 2002 - NYMEX 2002 0.8790 0.9050 2002 20 $ per mmbtu 1-Jan 15-Jan 29-Jan 12-Feb 26-Feb 12-Mar 26-Mar 9-Apr 23-Apr 7-May 21-May 4-Jun 18-Jun 2-Jul 16-Jul 30-Jul 13-Aug 27-Aug 10-Sep 24-Sep 8-Oct 22-Oct 5-Nov 19-Nov 3-Dec 17-Dec 31-Dec
50.0 45.0 40.0 35.0 30.0 25.0 20.0 Residual fuel in storage is below average Residual Fuel Stocks Max 94-03 Average 94-03 Min 94-03 21 Million Barrels 2-Jan 16-Jan 30-Jan 13-Feb 27-Feb 12-Mar 26-Mar 9-Apr 23-Apr 7-May 21-May 4-Jun 18-Jun 2-Jul 16-Jul 30-Jul 13-Aug 27-Aug 10-Sep 24-Sep 8-Oct 22-Oct 5-Nov 19-Nov 3-Dec 17-Dec
17-Dec 31-Dec NYMEX heating oil prices are at record levels NYMEX Heating Oil Prices, and 2002 1.5000 1.4000 1.3000 1.2000 1.4707 1.2559 1.2655 1.1000 1.0000 0.9000 0.8000 1.1106 0.9611 0.7000 0.6000 0.5000 22 3-Dec 2002 2002 1-Jan 15-Jan 29-Jan 12-Feb 26-Feb 12-Mar 26-Mar 9-Apr 23-Apr 7-May 21-May 4-Jun 18-Jun 2-Jul 16-Jul 30-Jul 13-Aug 27-Aug 10-Sep 24-Sep 8-Oct 22-Oct 5-Nov 19-Nov $ per gallon
Distillate oil in storage is below average Total Distillate Stocks 180.0 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 Average 94-03 Max 94-03 Min 94-03 23 Million barrels 2-Jan 16-Jan 30-Jan 13-Feb 27-Feb 12-Mar 26-Mar 9-Apr 23-Apr 7-May 21-May 4-Jun 18-Jun 2-Jul 16-Jul 30-Jul 13-Aug 27-Aug 10-Sep 24-Sep 8-Oct 22-Oct 5-Nov 19-Nov 3-Dec 17-Dec
Distillate oil in storage is lower in the Mid-Atlantic Total Distillate Inventories (heating oil and diesel fuel) Week ended Week ended Average Year Ago % Change from % Change from Oct 1 Sep 24 1999- last year Average Million Barrels Million Barrels Million Barrels Million Barrels National 120.9 123.7 127.1-5 126.8-5 East Coast 48.5 50.6 53.8-10 52.8-8 New England 12.4 12.6 8.8 41 10.2 21 Mid-Atlantic 25.6 26.2 31.0-17 30.1-15 South Atlantic 10.5 11.8 14.0-25 12.5-16 Midwest 31.5 31.4 28.4 11 28.6 10 Gulf Coast 26.6 26.8 30.5-13 30.9-14 Mountain 2.9 2.6 2.8 3 2.8 5 West Coast 11.3 12.4 11.6-2 11.8-4 High Sulfur Distillate Inventories (heating oil) Week ended Week ended Average Year Ago % Change from % Change from Oct 1 Sep 24 1999- last year Average Million Barrels Million Barrels Million Barrels Million Barrels National 49.0 51.0 50.7-3 56.5-13 East Coast 31.3 32.4 33.1-6 35.1-11 New England 10.1 10.6 6.3 60 8.2 23 Mid-Atlantic 16.7 16.8 21.3-22 21.6-23 South Atlantic 4.5 5.0 5.6-19 5.4-16 Midwest 7.7 7.7 6.9 12 8.2-7 Gulf Coast 7.6 8.2 8.2-8 10.3-27 Mountain 0.60 0.49 0.46 31 0.44 37 West Coast 1.9 2.2 2.1-8 2.4-19 24
NYMEX coal prices 25
Spot coal prices 26
Coal Stocks - EIA Coal Stocks 220000 200000 180000 1000 Short Tons 160000 2001 2002 140000 120000 100000 January February March April May June July August September October November December 27
OPEC Capacity - EIA Table 3a. OPEC Oil Production (Energy Information Administration\Short-Term Energy Outlook --October ) 8/1/ 9/1/ Aug-04 September-04 OPEC 10 OPEC 10 Surplus Quota Quota Production Production Capacity High Range Capacity High Range Algeria 830 830 1,250 1,250 1,250 0 Indonesia 1,348 1,348 945 940 940 0 Iran 3,817 3,817 3,900 3,900 3,900 0 Kuwait 2,087 2,087 2,400 2,400 2,400 0 Libya 1,392 1,392 1,550 1,550 1,550 0 Nigeria 2,142 2,142 2,400 2,300 2,300 0 Qatar 674 674 850 850 850 0 Saudi Arabia 8,451 8,451 9,500 9,500 10,000 10,500 500 1,000 UAE 2,269 2,269 2,500 2,500 2,500 0 Venezuela 2,992 2,992 2,500 2,500 2,500 0 OPEC 10 26,000 26,000 27,795 27,690 28,190 28,690 500 1,000 Iraq 1,800 2,300 2,300 0 Crude Oil Total 25,595 29,990 30,490 30,990 500 1,000 Other Liquids 3,904 3,904 Total OPEC Supply 33,499 33,894 28
EIA Crude Oil Forecast 29
EIA Natural Gas Forecast 30
Second quarter industry profits were below average Profit Margins (net income/sales) All U.S. Industry Oil & Natural Gas 8.0% 6.5% 6.4% 6.4% 7.6% 7.1% 6.0% 5.4% 5.3% 5.4% 4.0% 2.0% 0.0% Last 5 Years Q2 03 Q2 04 Sources: Second quarter financial statements of major oil and natural gas companies; and "Corporate Scoreboard," Business Week, various issues for all U.S. industries. 31
Industry profits in perspective Profit Margins of Major Industries ( :Q2 net income/sales) Banks Pharmaceuticals & Biotechnology Semiconductors & Equipment Software & Services Insurance Household & Personal Products Communications Equipment Telecommunication Services Real Estate Hotels, Restaurants & Leisure Health Care Food, Beverage & Tobacco Media All Industry Commercial Services & Supplies Oil & Natural Gas Air Freight & Logistics Capital Goods Utilities Consumer Durables & Apparel Materials Consumer Staples Industrials Retailing Automobiles 15.2% 14.4% 11.6% 11.6% 10.0% 9.9% 9.7% 9.4% 9.3% 9.3% 8.8% 7.6% 7.5% 7.1% 6.8% 6.8% 6.1% 6.1% 5.9% 5.8% 5.6% 3.8% 2.9% 19.4% 22.4% 0% 5% 10% 15% 20% 25% Sources: Second quarter financial statements of major oil and natural gas companies; and "Corporate Scoreboard," Business Week, August 16, for all other industries. 32
Industry concentration 8 Firm Concentration - 1997 Source: U.S. Department of Commerce, Public Citizen Floor Coverings Glass containers Auto manufacturers Tobacco Breakfast Cereals Breweries Tires Syrup Photographic equipment Soap Cutlery, flatware Butter Gloves Cookie and crackers Animal slaughtering Refineries M en's footwear Coffee and tea Snacks Wineries M ayonnaise Poultry processing Ice cream Refineries 1997 M anufacturing average 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 Share 33