US Oil Consumption

Prices at the gas pump seem to go higher and higher every day. This exorbitant raise in prices has caused the average American consumer to find ways to cut their fuel costs. This includes carpooling, riding the bus, and otherwise seeking ways to improve their mileage in their vehicles. All of this is having an effect on the production rates of the oil refineries. Higher prices are causing a decline in the demand at the pump and, therefore, a noted decrease in US oil consumption.

Because of the lower rates of US oil consumption in the last year, refineries have cut their production rates by almost 15%, making it difficult for the smaller refineries to continue to operate profitably.

Some of the biggest names in oil production have been hit hard by the decline in US oil consumption. These names include that of the Sunoco company. Its financials showed that it had losses in excess of $120 million dollars in the first quarter of 2008.

The conflict seems to be in the fact that prices are going up, yet the refineries are cutting production, supposedly due to US oil consumption going down. This makes no sense to consumer advocates who feel very strongly that if the refineries would just step up their production and stop the price war, then Americans gasoline and fuel purchase would return to a normal level.

The reason for this price war is that, in the 1990’s, there were several mergers that took place that significantly cut the total number of oil refiners directly associated with the U.S. This cut the competition and began a price war that is still being waged today, at the expense of the American consumer.

Diesel accounts for the majority of US oil consumption every day. Diesel is used widely in the transportation industry, as an industrial fuel, in agricultural applications, and in power generation. Diesel is simply a byproduct of the process of gasoline production and has been historically cheaper than gasoline. However, the price war has caused an increase in diesel prices so high that diesel is now, on the average, almost $1 higher per gallon than gasoline.

Consumer advocates are really pushing the idea that oil refinery executives need to stop the price war. Instead, they could really improve their profits and their share of the fuel market by reducing prices and increasing production. If they were to do so, US oil consumption would increase drastically, which would boost the refineries profits, allowing them to once again lower their prices to levels that are affordable to the average consumer in America.  US oil consumption is a vicious circle that can only be completed with the cooperation of the biggest refineries and the redevelopment of smaller ones to compete.