The U.S. is using spare refining capacity to export millions of barrels of oil products, while U.S. domestic demand remains weak. One of the more common misunderstandings I see in energy circles right now is the idea that U.S. oil demand has rebounded strongly since 2008. It hasn’t. The explanation can be found in the widening divergence between oil that’s imported for domestic usage, and oil that’s imported to convert into oil products for export.
Let’s first take a look at the last 15 years of U.S. petroleum consumption. This data is now updated through October, 2010.
[Click all to enlarge]
U.S. domestic demand for oil was up a weak 1.1% in 2010, coming off a low, crashy base in 2009. But worldwide demand for oil -- especially from developing nations -- is soaring. The result? The U.S. is using its spare refining capacity to turn oil into products, like diesel – for export. Behold the growth in Total Oil Product exports since the start of 2008. These have nearly doubled from near 1.2 million barrels per day at the start of 2008, to just above 2.2 million barrels per day as of mid-January 2011.
When you hear a newsletter writer, oil analyst, or podcast saying that U.S. domestic oil demand has rebounded strongly since 2008 – talking in terms of millions of barrels of restored demand – the mistake they are making is obvious: They are missing the heroic rise in U.S. exports of gasoline, diesel, and distillate. The error comes in part with the myriad measures EIA uses to measure U.S. demand for oil. Hopefully my disentangling of this data here is of some help.