Guest “Not adding up” by David Middleton
Personally, I do not think the EIA is fudging the numbers, at least not intentionally… But some numbers just don’t seem to add up
Gasoline prices have fallen by about $1/gal since mid-June.
This drop has been in conjunction with a decline in crude oil prices over the same period.
The Biden Maladministration claims the drop in prices is the result of their reckless decision to drain the nation’s Strategic Petroleum Reserve (SPR)… Perhaps the most ridiculous claim they have ever made. Most analysts attribute the drop in prices to recession fears and demand-destruction due to record high gasoline prices. The EIA data would seem to support the latter theory…
This is where things get odd…
Dodgy Demand Data? The Oil Price Collapse Conspiracy
By Alex Kimani – Aug 07, 2022WTI crude oil prices fell to their lowest point since early February on Thursday, giving up virtually all gains since Russia invaded Ukraine. WTI crude for September delivery tumbled -1.5% to close at $89.26/bbl while Brent crude for October delivery fell -2.1% to $94.71/bbl. WTI crude has lost ~9.5% over the course of the week, marking the largest one-week percentage decline since April amid growing fears that oil demand will collapse when western nations descend into a full-blown recession.
[…]
The Big Conspiracy
The collapse in oil prices has been so epic and unexpected that some oil pundits are now accusing the Biden administration of fabricating low gas demand data in a bid to hammer oil prices.
To wit, in late June the EIA shut down reporting for several weeks, ostensibly due to a server malfunction. But as ForexLive has pointed out, gasoline demand data has been consistently bad ever since the EIA returned: “Maybe there’s an issue with reporting or maybe it’s a conspiracy“, ForexLive has declared.
Even Wall Street has begun questioning the EIA data.Bank of America energy strategist Doug Legate has published a note titled the “fall of gasoline demand appears grossly exaggerated.’’
“For the week ending July 22nd, implied gasoline demand rebounded to 9.2 million b/d – a 1 million b/d increase vs the last two week average, and the second highest level of 2022,” BofA wrote in the note to clients. Curiously, the EIA reported a steep drop in gasoline demand shortly thereafter, prompting Piper Sandler global energy strategist to label the data “crooked”, saying the methodology left “significant room for error”.
[…]
Piper Sandler’s allegations are buttressed by U.S. refining giant Valero. Asked about falling gasoline demand at the company’s earnings call last week, CEO Gary Simmons had this to say:
“I can tell you, through our wholesale channel there is really no indication of any demand destruction… In June, we actually set sales records. We read a lot about demand destruction and mobility data showing in that range of 3% to 5% demand destruction. Again, we’re not seeing it in our system.”
Further, alternate demand data from GasBuddy deviates considerably from EIA’s. GasBuddy tracks retail gasoline demand at the pumps in the U.S. According to GasBuddy, there was a 2% rise in gasoline demand last week, making it the strongest demand of the year. In sharp contrast, the EIA reported a 7.6% drop in demand for the same time period.
[…]
By Alex Kimani for Oilprice.com
GasBuddy’s numbers for the last week of July diverged from the EIA’s.
GasBuddy tracks retail gasoline demand at the pumps in the US and they showed a 2% rise in gasoline demand last week while the EIA showed a 7.6% drop. Morevoer, last week was the strongest demand of the year from GasBuddy.
ForExLive
There are some differences in how they measure gasoline demand.
My personal observations are inline with GasBuddy’s. I drive back and forth from Dallas to Houston quite often. The two gas stations I generally stop off at in Leon County (~half-way from Dallas to Houston) are always crowded, particularly on Sunday afternoons.
In May, the most recent month available, U.S. refineries were operating at 93% of capacity.
EIA anticipated that the utilization rate would reach 96% in June…
JUNE 10, 2022
EIA expects high refinery margins to contribute to increasing fuel production this summerIn our June 2022 Short-Term Energy Outlook (STEO), we forecast that U.S. refinery utilization will be relatively high this summer in response to strong wholesale prices for petroleum products, such as diesel and gasoline, which have increased more than the price of the crude oil used to make them.
The price difference between the price of crude oil and the wholesale price of a refined petroleum product reflects the value of refining crude oil. This difference, known as the crack spread, can indicate refining margins and profitability. Crack spreads for both diesel and gasoline increased in the first several months of 2022.
Gasoline and diesel prices and crack spreads are well above historical averages in response to several factors including:
•Low inventories for both petroleum products in the United States and globally
•Fuel demand increases to near pre-pandemic levels
•Relatively low refinery production of both fuels compared with pre-pandemic levels
•Reduced petroleum product exports from Russia
In response to these high prices, we expect that refinery utilization will reach a monthly average level of 96% twice this summer, near the upper limits of what refiners can consistently maintain. We expect refinery utilization to average 96% in June, 94% in July, and 96% in August.
We estimate U.S. refinery inputs will average 16.7 million b/d during the second and third quarters of 2022. This average is lower than the 2019 refinery inputs average of 17.3 million b/d despite high utilization rates because of reductions in refinery capacity since early 2020. U.S. refinery capacity has fallen by almost 1.0 million b/d since early 2020 because several refineries were closed or converted.
We expect wholesale prices for gasoline and diesel will begin decreasing in the third quarter of 2022, as refinery production increases. Despite our forecast price decline, we expect that wholesale fuel prices will remain well above previous years through the summer, based on higher crude oil prices as well as the ongoing impact of low global inventories. Low international inventories are likely to face additional tightness in response to the recently announced European ban on Russia’s energy imports.
Principal contributors: Kevin Hack
EIA
If demand has actually fallen, while the refineries are still operating near theoretical full capacity, the stocks of gasoline and other refined products should be increasing. However, gasoline stocks are still well-below the 5-year average range.
These numbers just don’t add up:
- GasBuddy’s retail sales data don’t agree with EIA’s gasoline demand data.
- EIA’s gasoline stocks don’t support an over-supplied market.
- Refiners aren’t seeing a drop in demand, although their crack spreads have plummeted.
- Vehicle-miles driven hasn’t declined (yet).
Is it a conspiracy?
I don’t think it is. It’s not uncommon for EIA to have to revise their weekly estimates.
“The EIA does its best to get out petroleum data weekly but it’s a tough job and subject to all kinds of assumptions. HFI Reserach notes that the data is subject to big revisions when the month numbers are finally released. So, traders may be simply looking at bad data that will be adjusted.” ForExLive
I guess this leaves us with three likely answers:
- The economy is entering a recession and the demand-destruction is real.
- The EIA demand numbers are flawed and will soon be corrected upwards.
- The Biden Maladministration is fudging the numbers to create downward pressure on oil prices in a futile effort to improve his abysmal poll numbers.
Personally, I think it’s answer #2. The folks at the EIA strike me as too professional for these sorts of shenanigans. In case you haven’t noticed it: I relied on EIA’s data and analyses when I wrote this post. If I thought they were fudging any numbers, I wouldn’t trust their data and analyses. Are they wrong sometimes? Absolutely and they admit it.
While the economy has met the technical definition of a recession (two consecutive quarters of negative GDP growth), it’s a really weird recession. I don’t see any indications of demand destruction, aside from the price slide and EIA’s gasoline demand numbers.
If the drop in oil prices is due to bad numbers, when those numbers are corrected, oil prices should sharply rebound.
That said, the Biden Maladministration’s modus operandi is to fudge numbers and redefine common words and phrases. And I do think there is a real conspiracy here… A conspiracy to destroy America’s energy infrastructure… because climate change.
This is the real conspiracy:
DOE Issues Fifth Emergency Notice of Sale of Crude Oil From the Strategic Petroleum Reserve
JULY 26, 2022Notice is Part of Biden-Harris Administration’s Continued Actions to Help Protect Americans from Putin’s Price Hike at The Pump
WASHINGTON, D.C.—The U.S. Department of Energy’s (DOE) Office of Fossil Energy and Carbon Management (FECM) today announced an additional Notice of Sale of up to 20 million additional barrels of crude oil from the Strategic Petroleum Reserve (SPR). This Notice of Sale is part of President Biden’s announcement on March 31, 2022 authorizing the sale of crude oil from the SPR to address the significant market supply disruption caused by Putin’s war on Ukraine and help lower energy costs for American families.
The President’s announcement called to release one million barrels of SPR crude oil per day over six months. This historic release of SPR crude has provided a record amount of crude oil supply to the U.S. economy and will continue until the end of October 2022.
DOE plans to release, from the SPR, up to 2.8 million barrels of sour crude oil and 17.2 million barrels of sweet crude oil, totaling 20 million barrels with deliveries from September 16 until October 21, 2022. DOE must receive bids for this notice no later than 10:00 a.m. Central Time on August 2, 2022. Contracts will be awarded to successful offerors no later than August 11, 2022.[…]
DOE
It’s worth noting that protecting “Americans from Putin’s Price Hike at The Pump” is not the purpose of the SPR.
About the SPR
The Strategic Petroleum Reserve (SPR), the world’s largest supply of emergency crude oil was established primarily to reduce the impact of disruptions in supplies of petroleum products and to carry out obligations of the United States under the international energy program. The federally-owned oil stocks are stored in huge underground salt caverns at four sites along the coastline of the Gulf of Mexico. The sheer size of the SPR (authorized storage capacity of 714 million barrels) makes it a significant deterrent to oil import cutoffs and a key tool in foreign policy.
SPR oil is sold competitively when the President finds, pursuant to the conditions set forth in the Energy Policy and Conservation Act (EPCA), that a sale is required. Such conditions have only existed three times, most recently in June 2011 when the President directed a sale of 30 million barrels of crude oil to offset disruptions in supply due to unrest in Libya. During this severe energy supply interruption, the United States acted in coordination with its partners in the International Energy Agency (IEA). IEA countries released altogether a total of 60 million barrels of petroleum.
Additionally, the Secretary of Energy may authorize limited releases in the form of exchanges with entities that are not part of the Federal Government. This authority allows the SPR to negotiate exchanges where the SPR ultimately receives more oil than it released; thereby acquiring additional oil. With the exception of the 2000 Heating Oil Exchange, the SPR has entered into negotiated contracts at the request of private companies in order to address short-term, emergency supply disruptions to a refiner’s normal operations on several occasions.
DOE
When Biden began his occupation of the White House, the SPR stood at 638,085,000 bbl of crude oil. As of the end of May 2022, it was down to 523,109,000 bbl.
If the buffoon really does drain it at a rate of 1 million bbl/d through the end of October, it will be down to just over 370 million bbl. Sales previously authorized by Congress already had the SPR on track to be cut in half by 2032.
Biden’s 1 million bbl/d proposed release through the end of October could drain an additional 177 million bbl. Barring refilling it, the SPR is now on track to be down to 136 million bbl by 2032. That would cover only 30-45 days of our current net crude oil imports, less than half of the legally mandated 90-day supply.
Another observation: The vast majority of the planned SPR releases are of light-sweet crude. Most of our refineries are geared to process heavier sour crude oil. As such, most of the released SPR oil is being exported. US crude oil exports have skyrocketed since the 1 million bbl/d announcement.
The release of mostly light-sweet crude will directly compete with most domestic crude oil production and simply lead to more crude oil exports, rather than increase the supply to domestic refineries.
The average purchase price of the crude oil in the SPR was $29.70/bbl. Assuming there is any intent to refill it, the cost will likely be far higher than $29.70/bbl.
Maybe it’s not a conspiracy… Just the product of the dumbest President in U.S. history and his incompetent, functionally useless, socialist Maladministration.
via Watts Up With That?
August 9, 2022
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