can u.s. supply accommodate shifts to diesel-fueled light-duty vehicles? joanne shore john hackworth...
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Can U.S. Supply Accommodate Shifts Can U.S. Supply Accommodate Shifts to Diesel-Fueled Light-Duty Vehicles?to Diesel-Fueled Light-Duty Vehicles?
Joanne Shore
John Hackworth
Energy Information Administration
Hart World Refining and Fuels Conference
October 7, 2005
www.eia.doe.govwww.eia.doe.gov
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U.S. Diesel-Fueled LDV PressuresU.S. Diesel-Fueled LDV Pressures
Encouraging Diesel• Higher fuel prices
favor efficient vehicles
• State incentives to address greenhouse gas reduction
• Favorable customer factors
Slowing Diesel• Diminished diesel fuel
price advantage over gasoline
• Potential fuel supply constraints
• U.S. diesel fuel quality & emission issues
• Starting from “no” base; supply and customer issues
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OverviewOverview
• Diesel price advantage expected to diminish – but timing/degree uncertain
• Europe is important influence on diesel prices, and provides insight into potential U.S. diesel-fueled LDV growth
• Even under high growth scenarios, LDV impacts on diesel volumes minimal over next decade
• Assuming U.S. does not move to separate quality LDV diesel fuel, growth in diesel LDV’s should not create refining constraints in near term
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2005: Continuation of High Product 2005: Continuation of High Product Prices – Especially DistillatePrices – Especially Distillate
-250
255075
100125150175200225
Ja
n-9
9
Ja
n-0
0
Ja
n-0
1
Ja
n-0
2
Ja
n-0
3
Ja
n-0
4
Ja
n-0
5
$/B
arr
el
U.S. New York Monthly Average Spot Prices
Gasoline
No. 2 Heating Oil
Gasoline - No. 2 Heating Oil
Note: Gasoline is conventional regular
Source: Bloomberg
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In Response to Price, U.S. Distillate In Response to Price, U.S. Distillate Yields Have Been Unusually HighYields Have Been Unusually High
20%
21%
22%
23%
24%
25%
26%
27%
28%
J F M A M J J A S O N D
2005
Average (01-04)
Weekly U.S. Distillate Yields
Source: EIA Weekly Data
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Unusual 2005 Distillate Prices Unusual 2005 Distillate Prices InternationallyInternationally
-30
-20
-10
0
10
20
30
40Ja
n-9
5
Jan
-96
Jan
-97
Jan
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Jan
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Jan
-00
Jan
-01
Jan
-02
Jan
-03
Jan
-04
Jan
-05
Ce
nts
Pe
r G
allo
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Spot Gasoline - Heating Oil Price Differences
NY Harbor
Northwest Europe
Source: Bloomberg NY Conventional Gasoline, No. 2 Heating Oil; NW Europe 0.2% Heating Oil and Regular Gasoline
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Europe Is Unique In Degree of Shift to Europe Is Unique In Degree of Shift to Middle Distillate & Affects World MarketMiddle Distillate & Affects World Market
40%
45%
50%
55%
60%
65%
70%
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
Middle Distilate Share of Gasoline and Distillate Consumption
EU-25
World Excl FSU and EU-25
Source: BP Statistical World Review 2005
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EU’s Contribution: Price is Not Just EU’s Contribution: Price is Not Just About Volumes, But Quality As WellAbout Volumes, But Quality As Well
0
5
10
15
20
25M
ay-0
3
Jul-
03
Sep
-03
No
v-03
Jan
-04
Mar
-04
May
-04
Jul-
04
Sep
-04
No
v-04
Jan
-05
Mar
-05
May
-05
Jul-
05
Sep
-05
Cen
ts P
er G
allo
n
Diesel 10ppm-Heating Oil
Diesel 50ppm - Heating Oil
European ULSD - Heating Oil Prices
Source: Bloomberg NWE Barge
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Implications for Future Distillate PricesImplications for Future Distillate Prices
• Seen higher growth in distillates worldwide compared to gasoline in recent years
• Europe is a key factor in growing shift towards diesel
• May not have permanent distillate price parity with gasoline, but trends favor higher distillate prices
• Frequency and duration of future distillate price strength will influence type of refinery investment
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Europe Provides Insights into Distillate Europe Provides Insights into Distillate Prices and Diesel LDV PenetrationPrices and Diesel LDV Penetration
• Europe not only affects Atlantic Basin prices, but is also a major player in world distillate market
• Europe’s light duty vehicle growth provides insights for U.S. potential growth
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EU-15 Demand Mix Projected to See EU-15 Demand Mix Projected to See Declining Gasoline DemandDeclining Gasoline Demand
0
500
1000
1500
2000
2500
3000
3500
4000
1990
1995
2000
2005
2010
2015
Th
ou
san
d B
arre
ls P
er D
ay Diesel Fuel
Gasoline
EU-15 Demand Mix
Source: History IEA; Forecast Purvin & Gertz
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European Preference for Diesel Grew European Preference for Diesel Grew Quickly since Late 1990s Quickly since Late 1990s
22.3
48.2
0
10
20
30
40
50
Per
cen
t o
f N
ew
Reg
istr
atio
ns
1990 1992 1994 1996 1998 2000 2002 2004
W. Europe Diesel-Fueled Vehicle Share of New Passenger Car Registrations
Source: ACEA www.acea.be
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EU Distillate Refining Yield Growing as EU Distillate Refining Yield Growing as Gasoline Yield ShrinksGasoline Yield Shrinks
20
25
30
35
40
45
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Yie
ld P
erce
nt
EU-15 Refinery Yields (Production/Crude Inputs)
Gasoline Yield
Distillate Yield
Note: Distillate is heating oil and diesel.
Source: IEA
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Europe’s Growing Product ImbalanceEurope’s Growing Product Imbalance
-1000
-800
-600
-400
-200
0
200
400
600
800
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Th
ou
san
d B
arre
ls P
er D
ay
EU-15 Product Net Imports
Gasoline Net Exports
Middle Distillate Net Imports
Source: IEA
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Europe SummaryEurope Summary
• European diesel demand growth supported by recent strong growth in diesel-fueled LDVs
• Recent diesel-fueled LDV growth was primed from previous base already established
• European refineries investing for increased distillate yields, but demand mix changes away from gasoline continue to outpace supply shifts
• Future: Still see increasing gasoline exports for some time – but will economic distillate imports be available? Will large ULSD price premiums be the norm?
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U.S. Demand Growing for Both Gasoline and U.S. Demand Growing for Both Gasoline and DistillateDistillate
0
2000
4000
6000
8000
10000
12000
1990 1995 2000 2005 2010 2015
Th
ou
san
d B
arre
ls P
er D
ay
U.S. Gasoline & Distillate Demand
Gasoline
Distillate
Source: EIA, Annual Energy Outlook 2005
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Two Diesel Penetration CasesTwo Diesel Penetration Cases
Diesel Share of New LDV Sales
0%
2%
4%
6%
8%
10%
12%
2005 2010 2015
Pe
rce
nt
Reference Case
8% Case
10% Case
Source: EIA
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Light Duty Vehicle Sales (Thousands)Light Duty Vehicle Sales (Thousands)
2005 2010 2015
Reference Total LDV 16,416 17,215 17,658
Reference Diesel 716 710 749
8% Case Diesel 716 839 1,338
10% Case Diesel 716 915 1,818
Sources: EIA
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Demand Changes Relative to Demand Changes Relative to Reference CaseReference Case
Changes (Thousand Barrels Per Day)
8% Case 10% Case
2010 2015 2010 2015
Diesel Demand 10.8 82.5 14.9 139.0
Gasoline Demand -13.1 -113.7 -18.0 -191.8
Total LDV Demand -2.3 -31.3 -3.1 -52.7
Sources: EIA
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U.S. Gasoline & Demand Changes With Light U.S. Gasoline & Demand Changes With Light Duty Diesel 10% CaseDuty Diesel 10% Case
0
2000
4000
6000
8000
10000
12000
1990 1995 2000 2005 2010 2015
Th
ou
san
d B
arre
ls P
er D
ay
U.S. Gasoline & Distillate Demand
Gasoline
Distillate
Source: EIA, Annual Energy Outlook 2005
10% Case
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Refinery ImplicationsRefinery Implications
• During next decade, refiners will see little shift in diesel/gasoline demand due to diesel LDV growth
• Since the U.S. has a very small diesel-fueled LDV base, growth for U.S. diesel LDVs in the next 5 years will likely be slower than Europe’s recent penetration surge
• Assuming the U.S. will not create a separate LDV diesel fuel in the near term, refiners should see little impact of a developing LDV diesel market in the next decade
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ConclusionConclusion
• Diesel prices may not provide as attractive an incentive for LDV drivers as before – but high prices in general should maintain consumer interest in diesel-fueled LDV
• Europe will remain a key area to watch regarding Atlantic Basin diesel market pressures
• During the next decade, diesel-fueled LDVs should not affect overall U.S. gasoline/distillate mix significantly, and thus refinery supply should not become a constraint in the near term