The increased supply and fall in prices for oil and natural gas as a result of fracking was supposed to herald a renaissance in US manufacturing – but current trends are proving that significant risks remain if the market is left totally to decide where the priorities should lie.
As an FT article explains, back in November the US government’s Energy Information Administration (EIA) began publishing weekly data that suggested US oil consumption was running 4-5% higher than a year ago. For some products, such as propane and propylene, which are used in petrochemical plants and agriculture, growth was in the double digits.
For a country where oil demand was thought to be in structural decline, as car engines have become more efficient and heavy industries move offshore, the numbers were startling – so startling that they were widely dismissed.
But recent data is proving the original numbers correct.
Fuel Consumption Rising
Across a range of areas, consumption of oil and oil/natural gas derivatives is up.
As gas prices have remained relatively flat – between $3 to $4 per gallon – SUV sales have soared on a rising tide of confidence, up 12% year on year in 2013. Larger cars obviously equal greater gas consumption and demand for oil from the refineries.
Encouraged by lower oil and natural gas prices, petrochemicals firms have increased output by 2%, according to the FT, not just for the domestic market but increasingly for export to Latin America.
The surge in demand that has caused the most pain, though, is for propane and propylene, as another source explains.
Freezing temperatures and soaring exports of the fuel have created a scarcity resulting in prices more than doubling in a week at a central trading hub in Kansas. Terminals are rationing supplies and governors from Missouri to New Jersey have invoked emergency powers to speed distribution.
To be continued in a second post…