U.S. Liquid Fuels Production Offsets Supply Disruptions

Record-setting liquid fuels production growth in the U.S. has more than offset the rise in unplanned global supply disruptions over the past few years, although differences in quality and location suggest that the substitution may not be exactly one-for-one, reports the Energy Information Administration (EIA).

U.S. liquid fuels production, which includes crude oil, hydrocarbon gas liquids, biofuels, and refinery processing gain, grew by more than 4 MMbbld from January 2011 to July 2014, of which 3 MMbbld was crude oil production growth. During that same period, global unplanned supply disruptions grew by 2.8 MMbbld. Refinery processing gain accounts for total refinery output being greater than input due to the processing of crude oil into products.

U.S. production growth, the main factor counterbalancing supply disruptions on the global oil market, has contributed to a decrease in crude oil price volatility since 2011. Over the past 13 months, the monthly international oil benchmark (Brent) has moved within a narrow $5/bbl range, between $107/bbl and $112/bbl. In contrast, the range of monthly average Brent prices over the prior 13-month period—June 2012 to June 2013—was $21/bbl.

Global unplanned supply disruptions averaged 3.2 MMbbld during the first seven months of 2014 and peaked at 3.5 MMbbld in May 2014. The current level of supply disruptions is the highest since the Iraq-Kuwait war (1990-1991), when supply disruptions peaked at 4.3 MMbbld, based on data from the International Energy Agency. Non-OPEC supply disruptions include both crude oil and liquid fuels, while OPEC disruptions include only crude oil.