Trends and Transitions in the Diesel Market.ppt

Trends and Transitions in the Diesel Market Joanne Shore John Hackworth NPRA Annual Meeting 2007 Diesel Trends Overview ULSD Update What Lies Ahead for Distillate? Historical Perspective Future Directions in Atlantic Basin ULSD Update Production Imports Transition Issues Prices ULSD Production Ramped Up in May for June Start Date PADD Level Distillate Production(Aug - Oct 2006) Production Comparison to Expectations PADD 3 ULSD Refinery Status Diesel Imports Shift to ULSD Transition Issues Production ramped up quickly Distribution from refinery to terminals went well Now have limited number of terminals carrying low sulfur diesel Terminals carrying only ULSD may be supplying more than highway demand Winter diesel (Ultra-Low-Sulfur Kerosene) issues Warm weather “Winterized diesel” produced and more use of additives Diesel Prices Reflected ULSD Transition – But Note ’04 ’05 Spot Diesel Prices Outpaced Gasoline Most of the Action is At Wholesale Insight from Europe on Where Diesel Prices May Settle Down? Heating Oil Strengthening Since ‘05 What Lies Ahead for Distillate? First Look Behind: Historical Perspective Product Growth Europe United States Future Directions in Atlantic Basin Europe Is Major Driver of Recent Shift to Middle Distillate Europe’s Transportation Demand General policy to reduce energy use and carbon dioxide (CO2) emissions, but not meeting targets Petroleum demand growth has been small (annual 0.7% since 1995) Policies led to increased shift to diesel engines Diesel demand is increasing while gasoline demand is declining European Preference for Diesel Grew Quickly since Late 1990s European Gasoline Falling While Distillate Demand Increases OECD Europe’s Growth in Distillate Production Fallen Short of Demand Increase Europe’s Growing Product Imbalance Symbiosis: Growth in Gasoline US Imports OECD Europe Exports Europe U.S. 2005 Supply Demand Mix U.S. Demand and Supply Changes U.S. Gasoline and distillate demand relationship chan