HOUSTON (ICIS)--Facing stagnant domestic demand for motor gasoline, US refiners in 2018 will continue to pump out increasing amounts of fuels to serve growing international markets.
According to the US Energy Information Administration (EIA), cumulative daily demand in 2017 for finished motor gasoline demand was down by 1%, or about 100,000 bbl/day, to 9.2m bbl/day from 2016.
Gasoline production, however, has averaged around 10m bbl/day and is on a steady climb upwards.
The statistical decline in consumption is likely due to a number of factors, such as more efficient automobiles and higher prices.
However, with the state of California — the most populous state and the largest market for motor fuel — propping a bill to wipe hydrocarbon-burning vehicles from their roads by 2040, refiners must face the fact that domestic gasoline demand is not going to grow.
With that notion set in force, US refiners will seek international market growth to offset homeland depreciation.
In 2017, refiners exported record amounts of gasoline and diesel fuel, so with domestic feedstock, like WTI crude oil, trading at steep discounts to other global benchmarks, refiners can be expected to continue heightening those exports through 2018 and beyond.
“Global [motor fuel] demand growth next year is going to be the strongest we’ve seen in many years [so] the reason refiners are producing so much is that because there is a market for it,” said analyst Phil Flynn of the PRICE Futures Group.
In a clear outlook reversal from the last cycle, Shell will overhaul — instead of dismantling completely — a fluid catalytic cracking unit at its Convent, Louisiana refinery, readying the plant to continue making gasoline for another four-to-five year production cycle.
“They’re getting geared up to export a lot, so the story is that refiners are refining a lot of gasoline,” Flynn added.