Crude Oil & Liquid Fuels
Crude oil and liquid fuels demand in 2017 averaged 98.5 million barrels per day worldwide, an increase of 2.9 million barrels per day over 2016. Demand is projected to increase to 100.2 million barrels per day in 2018 and 102.0 million barrels per day in 2019. (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018)
U.S. crude oil and liquid fuels consumption was 19.9 million barrels per day in 2017(20.2% of total world consumption), and is expected to be 20.3 million barrels per day in 2018 and 20.7 million barrels per day in 2019. China second among countries in demand at 13.3 million barrels per day in 2017 and is expected consume 13.7 million barrels per day in 2018 (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018)
U.S. gasoline demand in 2017 decreased 0.3% to 9.29 million barrels/day, approximately 390 million gallons/day, or about 39 million fill-ups/day (based on a 10-gallon fill-up). (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018)
U.S. gasoline demand has been at record or near-record levels each of the past three years and is expected to increase 0.3% in 2018 to reach record demand of 9.33 million barrels/day and 9.4 million barrels/day in 2019. (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018)
U.S. gasoline demand increases over the first half of the year and peaks in the warmer months. In 2017, demand per day in August was 14.9% higher than in January.
(Source: U.S. Energy Information Administration, “U.S. Product Supplied of Finished Motor Gasoline”)
* based on preliminary numbers using weekly demand averages
U.S. monthly gasoline demand in August 2017 was a record 9.770 million barrels/day, surpassing the previous record 9.663 million barrels/day in June 2016. (Source: U.S. Energy Information Administration, “U.S. Product Supplied of Finished Motor Gasoline”)
Gasoline demand was 47% of total U.S. petroleum demand in 2016. (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018)
One in three American drivers (36%) said that the amount they drove had changed in 2017: Of that total, 34% said that they drove more and 66% said they drove less. (NACS 2018 Consumer Fuels Report)
Most Americans (78%) spend less than an hour per day in their vehicles; 9% spend more than 90 minutes each day. (NACS 2018 Consumer Fuels Report)
The average American household consumed 1,011 gallons of fuel (with the average driver consuming 583 gallons) and the average vehicle consumed 524 gallons. (Source: University of Michigan Transportation Research Institute, 2013 data released in 2015).
Based on the 2017 average gas price of $2.42, the average household spent approximately $2,450 on fuel in 2017. With the average household income at $57,617, this means that gasoline expenditures were 4.3% of overall household income in 2017. (Source: U.S. Census, Household Income: 2016)
Approximately 135 million people — 54% of the adult population — commute to work every day. (Source: “The Digital Drive” by pymnts.com)
Roughly 85% of commuters drive a car to and from work: 76% are full-time workers and 72% make the trip five days a week. (Source: “The Digital Drive” by pymnts.com)
The average commute time per day is 52 minutes—or 26 minutes each way. (Source: “The Digital Drive” by pymnts.com)
Americans depend upon the automobile to get to work. About 86% take a private vehicle (76.4% drive alone and 9.4% carpool) as their primary means of transport to work, compared to 5.2% who use public transit, 2.8% who walk and 4.4% who work at home. (Source: U.S. Census Bureau, “Who Drives to Work? Commuting by Automobile in the United States: 2013,” released in 2015)
There were 263.6 million registered vehicles in 2015. (Source: U.S. Department of Transportation, Bureau of Transportation Statistics)
Americans travelled 8.794 billion miles per day in 2017, and are expected to travel 8.899 billion miles per day in 2018. With 263.6 million registered vehicles in the United States travelling 8.611 billion miles/day in 2015, this means that the average vehicle in 2015 travelled 33 miles per day. (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018)
The average age of vehicles on U.S. roads has steadily increased. In 2016, the average age of vehicles was 11.6 years, up from 9.9 years in 2006 and 8.5 years in 1996. (Source: Bureau of Transportation Statistics)
Car sales declined 1.8% to17.25 million passenger vehicles sold in 2017. The Ford F Series had a 9.3% sales increase (896,764 units) and was the top-selling vehicle in the United States for the 36th straight year. (Source: Automobile magazine, January 4, 2018)
While overall automobile sales were down in 2017, EV sales increased 25.9% to 199,826. The top three sellers were the Tesla Model S 927,060), Chevy Bolt EV (23,297) and Tesla Model X (21,315). (Source: Inside EVs)
The estimated adjusted fuel economy for model year 2017 passenger vehicles increased 2.0% to a record 25.2 miles per gallon. (Source: U.S. Environmental Protection Agency: Light-Duty Vehicle CO2 and Fuel Economy Trends)
There was a dramatic increase in drivers as a percentage of the U.S. population from 1949 (39.8%) to 1983 (66%) before plateauing. In 2012, licensed drivers were 67.5% of the U.S. population. (Source: Fuels Institute, “Driver Demographics: The American Population’s Effect on Vehicle and Fuel Demand”)
The percentage of teenagers with driver’s licenses has decreased over the past 30 years. In 2012, only 51% of teenagers have driver’s licenses, a steep decline from 1982 (67%). (Source: Fuels Institute, “Driver Demographics: The American Population’s Effect on Vehicle and Fuel Demand”)
There are more females than males in the United States with driver’s licenses. Of the 221.7 million licensed drivers, women were 50.6% of all drivers in 2016. (Source: Federal Highway Administration: Highway Statistics 2016)
The average vehicle miles travelled per driver is 13,476. Men average 16,550 miles/year and women average 10,142 miles/year. (Source: Federal Highway Administration)
During an average week, people take more trips on weekdays than weekends. Fridays were the busiest days, largely because people make social and recreational trips in addition to regular work and school trips. The least travel occurred on Sundays, although the lower numbers of work trips were partially offset by additional social/recreational and church trips. Over the last 15 years, about one-fifth of trips involved trip-chaining, or a sequence of trips with stops of less than 30 minutes (usually errands). (Source: Passenger Travel: Facts and Figures 2015)
There are 4.14 million miles of road in the United States and 8.71 million lane miles.
(Source: Federal Highway Administration: Highway Statistics 2016)
World crude oil and liquid fuels supply increased 1.6 million barrels/day to 98.0 million barrels/day in 2017 and is expected to increase to 100.4 million barrels/day in 2018. (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018)
Non-OPEC countries supplied 60.0% of total liquid fuels in 2018. (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018)
Liquid fuels production from countries outside OPEC increased by 0.3 million barrels/day to 58.7 million barrels/day in 2016, reversing the first production decline in nine years. Production is expected to increase to 61.0 million barrels/day in 2018. (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018)
The top three producers of petroleum and other liquids supply in 2017:
For the second straight year, Russia had production of 11.2 million barrels/day of petroleum and other liquids, which is a post-Soviet production record. Production is expected to decrease slightly to 11.1 million barrels/day in 2018. China increased production by 0.4 million barrels/day to 4.8 million barrels/day and is expected to stay at that level in 2018.
(Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018)
U.S. fuel ethanol blended into gasoline was 0.95 million barrels/day in 2017; the ethanol share in gasoline averaged 10.2% in 2017. (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018)
The U.S. imported 10.1 million barrels/day of crude oil and finished petroleum products (up 0.3% from 2016), of which 7.9 million barrels/day was crude oil. (Source: American Petroleum Institute, December 2017 Monthly Statistical Report)
Canadian imports were 33.7% of total petroleum imports in 2017. (Source: American Petroleum Institute, December 2017 Monthly Statistical Report)
The U.S. has record petroleum exports in 2017 of approximately 5.2 million barrels/day. Crude oil and refined product exports increased by 0.97 million barrels/day (18.5%) over 2016. (Source: American Petroleum Institute, December 2017 Monthly Statistical Report)
The top four net importers of petroleum (crude oil and finished products) to the United States in 2017 were:
(Source: American Petroleum Institute, December 2017 Monthly Statistical Report)
Stocks and Inventories
Reversing three years of inventory builds that helped push fuel prices lower, global petroleum and other liquid fuels inventories declined by 0.5 million b/d in 2017. However, inventories are expected grow by about 0.2 million barrels/day in both 2018 and 2019. (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018)
There are 7 billion to 8 billion barrels of crude oil tied up in worldwide stocks at any given time — from the wellhead to the consumer, filling tankers, pipelines, railcars and trucks — linking all of the markets. (Source: U.S. Energy Information Administration)
Holding inventory costs money — approximately $1.50 a barrel per month for oil if a company owns the tank storage facility and $4 per barrel per month if the storage is rented. For gasoline, the costs are about 1 cent per gallon per month if the storage space is rented. Thus, companies try to manage their inventories as efficiently as possible. (Source: U.S. Energy Information Administration)
Strategic Petroleum Reserve
With a designed capacity of 713.5 million barrels, the U.S. Strategic Petroleum Reserve (SPR) is the largest stockpile of government-owned emergency crude oil in the world. As of February 2018, it had 665.1 million barrels of inventory. The SPR was established in 1975 in the aftermath of the 1973-1974 oil embargo to provide emergency crude oil supplies for the United States. The oil is stored at four sites with deep underground storage caverns created in salt domes along the Texas and Louisiana Gulf Coasts. (Source: U.S. Department of Energy, SPR Quick Facts and FAQs)
Based on average daily imports, the SPR would provide 149 days of import protection, based on 2015’s net petroleum imports. (Source: U.S. Department of Energy, SPR Quick Facts and FAQs)
The maximum drawdown capability of the SPR is 4.4 million barrels per day. It would take 13 days from the time a presidential decision was made to tap the SPR for oil to enter the U.S. market. (Source: U.S. Department of Energy, SPR Quick Facts and FAQs)
On average, U.S. refineries produce 20 gallons of gasoline, 11 gallons of distillate fuel (largely diesel), 4 gallons of jet fuel and 9 gallons of other refined product from every 42-gallon barrel of oil. The sum total of refined product is more than the input because of refinery processing gain. (Source: U.S. Energy Information Administration, Refining Crude Oil)
The Motiva refinery in Port Arthur, Texas, has a capacity of 603,000 barrels of crude oil per day, making it the largest refinery in the United States and one of the 10 largest in the world. By comparison, the world’s largest refinery is the Jamnagar refinery in Gujarat India, which has a capacity of 1.24 million barrels per day. (Source: U.S. Energy Information Administration)
Planned periodic shutdowns of refineries, called “turnarounds,” allow for the regular maintenance, overhaul, repair, inspection and testing of plants and their process materials and equipment. They are scheduled at least 1 to 2 years in advance and usually when demand for refined product is at its lowest level, typically early in the year. A refinery usually has a turnaround every 3 to five years. At this time, refineries also may convert their “crackers” so that they can refine summer-blend fuel. (Source: U.S. Energy Information Administration)
The length of a refinery turnaround is typically 1 week to 4 weeks, depending on the unit and the amount of maintenance needed. The industry average is about four years between turnarounds for catalytic cracking units. (Source: American Petroleum Institute)
More than half of the U.S. refineries have closed over the past 35 years. In 1982 (the earliest data provided), there were 301 operational refineries. There were 141 operational refineries as of January 2018. The last major refinery built in the United States was completed in 1976. (Source: U.S. Energy Information Administration, Number and Capacity of Petroleum Refineries)
Despite the precipitous drop in the number of refineries operating in the United States, domestic refining capacity has not declined. Increases in facility size and improvements in efficiencies have offset much of the lost physical capacity of the industry. The operating capacity of U.S. refineries in 2017 was a record 18.62 million barrels of crude oil per day, an increase over the 18.32 million barrels in 2016. (Source: U.S. Energy Information Administration, U.S. Refinery Operable Atmospheric Crude Oil Distillation Capacity)
The U.S. has 669 million barrels of bulk storage for gasoline and diesel fuel at refineries, pipelines and ports. (Source: Fuels Institute December 2016 research report, “Assessment of the U.S. fuel Distribution Network”)
General purpose tankers are often used to transport refined product on shorter trips, such as between North America and Europe. The can transport 70,000 to 190,000 barrels per tanker. Crude oil from the Middle East is moved mainly by Very Large Crude Carriers (VLCCs) capable of delivering 2 million barrels per trip. A small number of Ultra-Large Crude Carriers can deliver as much as 3.7 million barrels of crude oil. A train of 100 cars can transport 3 million gallons and a truck typically holds 9,000 gallons. (Source: U.S. Energy Information Administration)
Shipping oil from Venezuela to the U.S. takes approximately 6 to 8 days (roundtrip); shipping oil from the Middle East to the United States takes between 40 to 45 days (roundtrip). During this journey, the price — and ownership — of the oil can change a number of times. (Source: American Petroleum Institute)
The first oil pipeline in the United States was built in 1865, following the 1859 discovery of oil in Pennsylvania. Today, pipelines are the most important petroleum supply line in the United States for transporting crude oil, refined fuel and raw materials. Pipeline transport crude oil and more than 50 refined petroleum products, including various grades of motor gasoline, home heating oil, diesel fuel, aviation fuel, jet fuels and kerosene. (Source: Pipeline 101, The History of Pipelines)
The diameter of pipelines varies greatly. For cross-country crude oil transport, diameters are typically 8 to 24 inches, but are as large as 48 inches for the Trans Alaska Pipeline System. Pipelines for refined products are range in size from 8 to 42 inches. (Source: Pipeline 101, How Do Pipelines Work?)
Interstate petroleum pipelines transported 18.1 billion barrels of product in 2015 — or 50 million barrels per day. (Source: Association of Oil Pipe Lines, 2017 Annual Liquids Pipeline Report)
Approximately 56% of the liquid travelling through pipelines is crude oil; the remaining is refined product (gasoline, diesel fuel, jet fuel, etc.) and natural gas liquids (propane, ethane, etc.). The cost to transport a barrel of crude oil from Alberta, Canada, to Cushing, Oklahoma, is about $4 and it is another $3 per barrel to transport it from Cushing to Houston. (Source: Association of Oil Pipe Lines, About Pipelines)
The Colonial Pipeline, the major product pipeline that stretches from Texas to New Jersey, transports almost 40 different formulations of gasoline alone — different grades of each mandated type of gasoline, the requirements for which vary seasonally and regionally. Liquefied ethylene, propane, butane and some petrochemical feedstocks are also transported through oil pipelines. (Source: Colonial Pipeline Co.)
Pipelines can stretch to hundreds and even thousands of miles long. In 2016, there were 212,568 miles of liquids pipeline operating across the United States, including 76,092 miles of crude oil pipeline, 62,435 miles of refined petroleum pipeline (gasoline, diesel, jet fuel and other refined products) pipeline, and 68,831 miles of highly volatile liquids (propane, ethane, butane, etc.) pipeline. (Source: Pipeline and Hazardous Materials Safety Administration, Annual Report Mileage)
Crude oil moves through pipelines at about 3 to 5 miles per hour (about a walking pace), but other products can move through faster depending upon line size, pressure and other factors such as the density and viscosity of the liquid being transported. At these rates, it takes from 14 days to 24 days to move liquids from Houston to New York City. (Source: Colonial Pipeline Company)
A map showing where pipelines are located can be viewed at pipeline101.org
The amount of petroleum product transported by rail increased significantly over the past decade, from 9,500 carloads of crude oil in 2008 to 493,146 carloads in 2014. However, as production in the Bakken region declined over the past few years, so has rail transport of crude oil, dropping to 409,949 carloads in 2015 and 211,986 carloads in 2016. It further declined by 36% in Q1 2017 compared to the year prior. Each rail car holds approximately 700 barrels of product, meaning that rail transported 407,00 barrels/day in 2016, or 4.6% of total U.S. production. (Source: Association of American Railroads, U.S. Rail Crude Oil Traffic)
Brent crude oil spot prices averaged $54.15/barrel in 2017. They are expected to average $62.39 in 2018. West Texas Intermediate (WTI) crude oil spot prices averaged $50.79/barrel in 2017. They are expected to average $58.28 in 2018. (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018)
With 42 gallons in each barrel of oil, a $1 change in the price of a barrel of oil roughly translates to a 2.4-cent change per gallon at the pump.
U.S. retail (regular) gasoline prices averaged $2.42/gallon in 2017, a 27-cent increase after two straight years of sharp declines. Gasoline prices averaged $2.15 in 2016. They are expected to increase to $2.62 in 2018. (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018)
On-road diesel fuel averaged $2.65/gallon in 2017, increasing 34 cents/gallon from 2016. They are expected to average $2.91 in 2018. (Source: U.S. Energy Information Administration, Short-Term Energy Outlook, February 2018)
Over the past 10 years, gas prices have averaged $2.64 to start the year, slightly higher than the price to begin 2017. However, the price to begin 2018 is the highest since 2014:
2018: $2.52 per gallon
(Source: U.S. Energy Information Administration, Gasoline and Diesel Fuel Update)
Half of the cost of a gallon of gas in 2017 was from the cost of crude oil (50%). Other contributing costs were taxes (19%), refining (17%) and distribution and marketing (14%). This last category includes all post-refinery expenses and retailer profit. (Source: U.S. Energy Information Administration, Gasoline Pump Components History)
Price volatility has been extreme over the past two decades. Daily crude oil prices have fluctuated between a low of $18.28 in November 2001 to a high of $147.27 per barrel in July 2008. Daily national average gasoline prices fluctuated between a low of $1.06 in December 2001 to a high of $4.11 in July 2008. The highest average daily gas price for a mainland state was $4.67 in California in October 2012. (Source: AAA/U.S. Energy Information Administration data)
Since the final implementation of the Clean Air Act Amendments in 2000, the seasonal transition to summer-blend fuel has helped gasoline prices rise significantly before they reached their peak, with increases ranging from a low of 20 cents in 2003 to a high of $1.13 in 2008. The average annual increase since 2000 is 53 cents.
(Source: U.S. Energy Information Administration, Gasoline and Diesel Fuel Update, weekly U.S. regular, all formulations)
Gasoline taxes averaged 51.96 cents per gallon in January 2018. This total includes 18.4 cents per gallon in federal taxes, plus state and local taxes. (Source: American Petroleum Institute, Motor Fuel Taxes January 2018)
The states with the highest gasoline taxes, as of January 2018, are:
(Source: American Petroleum Institute, Motor Fuel Taxes January 2018)
The states with the lowest gasoline taxes, as of January 2018, are:
Diesel fuel taxes averaged 59.76 cents per gallon in January 2018, which includes 24.4 cents per gallon in federal taxes. The state with the highest total diesel fuel taxes was California ($1.0611 per gallon; the state with the lowest was Alaska (36.77 cents per gallon). (Source: American Petroleum Institute, Motor Fuel Taxes January 2018)
Convenience store industry credit and debit card fees ($9.5 billion) in 2016 were nearly as much as convenience store industry profits ($10.2 billion). (Source: NACS State of the Industry Report of 2016 Data)
Three quarters (75%) of all transactions at the pump are by plastic — either debit (36%) or credit (39%) card. (Source: NACS 2018 Consumer Fuels Report)
The gross margin (or markup) on gasoline in 2017 was 21.7 cents per gallon, or 9.1% of the average price of $2.39 for the year. Over the past five years, retailer gross margins have averaged 20.7 cents per gallon, or 7.8% of the overall price. (Source: OPIS)
2017 – 21.7 cents (9.1% of price of fuel)
2016 – 19.9 cents (9.4%)
2015 – 20.4 cents (8.5%)
2014 – 22.3 cents (6.6%)
2013 – 19.0 cents (5.4%)
While about half of the more than 122,552 convenience stores selling gasoline are “branded” outlets selling a specific refiner’s brand of fuel, they are typically not owned by the refiner. This is even more apparent with the five major integrated oil companies. Today, only two major oil companies own and operate convenience stores in the U.S.: Chevron Corp. (302 stores) and Shell Oil Products US (14 stores). ExxonMobil Corp., BP North America and Phillips 66 do not own and operate any stores. (Source: Nielsen data)
There were 152,995 total retail fueling sites in the United States in 2013, the last year measured by the now-defunct National Petroleum News’ MarketFacts. This was a steep and steady decline since 1994, when the station count topped 202,800 sites.
As of December 31, 2017, there were 122,552 convenience stores selling motor fuels in the United States. This represents 79.0% of the 154,958 convenience stores in the country. (Source: NACS/Nielsen 2018 Convenience Industry Store Count)
Convenience stores sell approximately 80% percent of the motor fuels purchased in the United States. (NACS State of the Industry data)
Most convenience stores selling motor fuels are one-store operations: 58.6% (71,804 stores) of the country’s 122,552 convenience stores selling fuels are one-store operations. (Source: NACS/Nielsen 2018 Convenience Industry Store Count)
In addition to convenience stores and fuel focused retail sites, there are 6,221 big-box retailers selling fuel. These sites accounted for an estimated 15.3% of the motor fuels (gasoline) purchased in the United States and have sales volumes roughly double that of traditional retailers. (Source: Energy Analysts International (EAI Inc.), Fuel Markets and Retail Group -May 2017 Market Metrics)
The top five hypermarkets selling fuel, by store count, in fuels retailing are:
(Source: Energy Analysts International [EAI, Inc.])
There are a total of 54,751 public alternative fueling options in the United States as of February 2018: Electricity (17,214 stations/47,185 charging outlets), E85 (3,157 sites), propane (3,155 sites), compressed natural gas (939 sites), biodiesel (202 sites), liquefied natural gas (74 sites) and hydrogen (39 sites). Only electricity and E85 increased over the past year. Because some stations have multiple fueling options, the actual station count is lower. (Source: U.S. Department of Energy, Alternative Fueling Station Counts by State)
Sales and Customers
Motor fuels sales in convenience stores totaled $316.8 billion in 2016 and accounted for 58% of the convenience store industry’s sales. However, because of low margins, motor fuels sales contributed to 34% total store gross margin dollars. The average convenience store sold 149,257 gallons of motor fuels per month in 2016, which translates into approximately 4,900 gallons per day. (Source: NACS State of the Industry Report of 2016 Data)
Nearly half of all gas customers (45%) go inside the store, whether to buy an item, pay for their gas at the register or use the bathroom or ATM. (Source: NACS 2018 Consumer Fuels Report)
Americans buy gas most often during the mid-day period:
(NACS 2018 Consumer Fuels Report)
Sales of premium and mid-grade have declined over the past few decades because consumers traded down octane levels when prices increased. Regular grade gasoline accounted for 86.8% of all gasoline gallons sold in 2017 (down 0.2 from 2016). Mid-grade accounted for 1.8% of gasoline volume (down 0.2 from 2016) and premium accounted for 11.4% (up 0.3 from 2016). Twenty years ago (1997), regular accounted for 71.6% of sales, mid-grade was 11.8% and premium was 16.6% (Source: U.S. Energy Information Administration, Prime Supplier Sales Volumes January-November 2017)
Gasoline theft, also called “drive-offs,” is a problem at stores that don’t require prepay. The average loss per store in 2016 was $888 per store reporting theft. It is difficult to get an industry-wide number because only a small percentage of stores today allow customers to pump their fuel before paying. Gasoline theft peaked in 2005 when it cost the industry an estimated $300 million. It has declined considerably since September 2005 (post-Hurricane Katrina when gasoline rapidly increased and topped $3 per gallon) as more stations began mandating prepay to stop theft. (Source: NACS State of the Industry data)
Barrel: The unit of measure for petroleum products. A barrel holds 42 gallons and futures contracts are in 1,000-barrel lots. According to Daniel Yergin, the standard of a 42-gallon barrel dates to 1482, when King Edward issued a statute that 42 gallons was the standard for a barrel of herring.
‘Boutique’ Fuels: Unique gasoline blends required for a specific region or metropolitan area of the U.S. Prior to 1990, six types of gasoline were sold in the United States. Today, there are 14 unique gasoline formulations (not including regular/mid-grade and premium octanes for each fuel) manufactured for, and sold within, specific markets throughout the country that are mandated by federal, state, and local governments. These fuels are not interchangeable with fuel blends sold in other areas of the country.
Branded Retail Outlet: A retailer that sells a motor fuel with the brand name of a major oil company or refiner, but is not necessarily owned (and is usually not owned) by that company. Branded retailers benefit from marketing and advertising support, consumer brand loyalty and priority access to gasoline supplies. Lately, a new benefit has emerged, with branded stations participating in loyalty programs with grocery chains, in particular. In return, the branded marketer pays a surcharge for the use of the brand and the benefits that come with it.
Ethanol-Blended Fuels (E10, E15, E85, etc.): E10 (90% gasoline and 10% ethanol) is approved for use in all new U.S. automobiles. Higher blends of ethanol (known as “flex fuels”) can be used in flex-fuel vehicles and under some other conditions. E15 is 85% gasoline and 15% ethanol and is approved by the U.S. Environmental Protection Agency for use only in vehicles manufactured in 2001 or later, but not in older vehicles, motorcycles, watercraft or small engines. E85 is not 85% ethanol; it is a mixture of gasoline with ethanol content between 51% to 83%.
Fungible: Interchangeable. The U.S. gasoline system was designed to facilitate the efficient flow of gasoline to all regions of the nation, allowing the same gasoline formulation to be sold in all markets. The system is no longer fungible, with 14 unique gasoline formulations required in specific markets throughout the United States.
Crude Oil Futures: Crude oil future have been trading on NYMEX since 1983 and are now the most heavily traded commodity. Futures trade in units of 1,000 U.S. barrels (42,000 gallons) and
Trading terminates at the close of business on the third business day prior to the 25th calendar day of the month preceding the delivery month.
Organization of Petroleum Exporting Countries (OPEC): OPEC an international organization of 13 countries that are heavily reliant on oil revenues as their main source of income. OPEC’s 13 members — Algeria, Angola, Ecuador, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela — collectively supply about 40% of the world’s crude oil and liquid fuels output, and possess more than three-quarters of the world’s total proven crude oil reserves. Gabon rejoined OPEC in July 2016 after a 21-year absence. Indonesia reactivated its membership in January 2016 after a seven-year hiatus but terminated membership in November 2016. Twice a year, or more frequently if required, the oil and energy ministers of OPEC member countries meet to decide on its output level, and consider whether any action to adjust output is necessary in the light of recent and anticipated oil market developments.
Pass-Through: The time from which wholesale price changes fully reach consumers. Wholesale gasoline price increases — or decreases — paid by retailers are not immediately passed on to consumers, but are spread over a period of time. A large portion of the price change is passed through immediately, with the rest spread over a period of time that could be as long as eight weeks. Pass-throughs help minimize the price volatility of gasoline.
Petroleum Administration for Defense Districts (PADD): The U.S. Department of Energy divides the United States into five regions for planning purposes. The result is a geographic aggregation of the 50 states and the District of Columbia into five districts, each operating essentially as its own market. The five districts are: PADD I (East Coast), PADD II (Midwest), PADD III (Gulf Coast), PADD IV (Rocky Mountain) and PADD V (West Coast).
(Graphic courtesy of Association of Oil Pipe Lines)
Petroleum Retailer: Refers to convenience stores that sell motor fuels. As of December 31, 2017, a total of 122,552 convenience stores were selling motor fuels in the U.S. (79.1% of country’s 154,958 convenience stores). These fuels retailers are also referred to as “petroleum marketers.”
Refinery: Where crude oil is refined into a specific blend of gasoline or other fuels (such as diesel, kerosene, etc.) or for other oil-based applications. There are currently 141 operable refineries in the U.S. — less than half the number 35 years ago. The operating capacity of U.S. refineries in 2017 was a record 18.6 million barrels of crude oil per day. No major new refinery has been built in the United States since 1976.
Reformulated Gasoline (RFG): The 1990 Clean Air Act Amendments required the nation’s most polluted metropolitan areas to sell a special blend of gasoline to reduce the emissions of ozone forming volatile organic compounds (VOCs) and toxic air pollutants. The first phase of the RFG program began in 1995 and the second (current) phase began in 2000. RFG is required in cities with high smog levels and is optional elsewhere. RFG is currently used in 17 states and the District of Columbia. Approximately 30 percent of gasoline sold in the U.S. is reformulated.
Replacement Costs: The cost to acquire the next shipment of fuel. This price is almost always different than the cost of the gas that retailers have in their tanks. Because of the enormous volume of fuel sold — a typical store sells 4,900 gallons of gas a day — retailers must price their fuel based on their estimated cost of the next delivery. Even slight wholesale price variations can increase a retailer’s replacement cost by hundreds — or even thousands — of dollars. The importance of replacement costs is particularly acute for smaller businesses, which have less cash on hand to meet payments.
Spot Market: This market is usually comprised of motor fuels that have not been pre-allocated to the integrated or branded outlets. Retailers and other fuel distributors purchase fuel at terminals, or “racks,” where costs fluctuate based on current prices.
Summer-Fuel Blends: Several state and local governments have developed fuel regulations to control for the formation of smog during summer months. These generally require that gasoline sold during the summer have a lower Reid vapor pressure (RVP), which measures the gasoline’s potential to emit vapors, which contribute to the formation of smog.
Terminal: A bulk gasoline terminal is a gasoline storage facility that receives gasoline by pipeline, ship or barge, and has a gasoline throughput greater than 20,000 barrels per day. The loading rack at the terminal is the broad term for the the loading arms, pumps, meters, shutoff valves, relief valves and other piping and valves that fill delivery tank trucks picking up product at the terminal.
Tight Supplies: Describes a situation in which demand for gasoline — or crude oil — exceeds the supply available, and prices rise based on this supply/demand imbalance. Also known as “market shorts” or “upsets.”
Ultra Low Sulfur Diesel (ULSD): ULSD is a clean-burning diesel fuel that is defined by the United States Environmental Protection Agency (EPA) to have a maximum sulfur content of 15 parts per million (ppm). It was phased into use between 2006 and 2010.
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