for Diesel demand
The shipping industry accounts for five million barrels per day of demand. Implications of both fuel specification changes coming in 2020 and the emissions target for 2050 could be enormous for refiners and the entire oil industry.
Factors other than ridesharing carry more weight behind the surge in VMT. Lower pump prices, economic growth, and rising household income are underpinning increased travel.
Although new regulations will improve efficiency and curb pollutants, the electrification of the vessels on the water and the growth of autonomy in shipping, similar to changes in the auto industry, can bring about widespread benefits.
An extended period of upstream investment cuts and the fact that petroleum products still fuel more than 90 percent of the transportation sector could mean we’re headed for another price spike. But slower economic growth and structural shifts on the demand side could keep another bull market from occurring.
The contradiction of proposed increases in fuel efficiency standards for large trucks is that although they will reduce oil consumption, they will also discourage the adoption of alternative vehicles that run on natural gas and make them less competitive in the trucking sector.
The oil majors reported very dismal numbers for the first quarter, but earnings exceeded market expectations largely because of earnings from their downstream units: Refining operations have allowed the large integrated oil companies to weather low oil prices much better than upstream E&P companies.
There's a clear opportunity for new downstream capacity in North Dakota, but intensely high capital costs, oil price volatility, complex regulatory hurdles, and the uncertain outlook for shale could derail refining projects in the state.
The refining sector is the one part of the oil & gas industry that is actually making money in the current low price environment. The good times are slowing down, with demand growth weakening and refined product inventories ballooning, but U.S. refiners are still set to have a strong year in 2016