Industry Manufacturing Production

Crude Oil Is The Most Significant Contributor To The Price Of Gasoline

The price of crude oil remains the single most significant contributor to the price of gasoline. The U.S. Energy Information Administration (EIA) estimated that in July 2019, the price of crude oil accounted for 52% of the average U.S. retail price of regular gasoline, followed by taxes (18%), refining costs (16%), and distribution and marketing expenses (14%). Unlike taxes and the expenses associated with distribution and marketing, crude oil prices and refining costs tend to be relatively volatile and typically are responsible for most of the changes in gasoline prices. Because a barrel of crude oil contains 42 gallons, each dollar per barrel of sustained price change in crude oil translates to an average change of about 2.4 cents/gal in petroleum product prices. The price of Brent crude oil fell 17% from $69.82 per barrel (b) on August 27, 2018, to $58.25/b on August 26, 2019, contributing to lower gasoline prices compared with 2018.

The week leading into Labor Day is typically one of the busiest driving periods of the year during the already-busy summer driving season (April through September). According to data from the Federal Highway Administration (FHWA), U.S. drivers drove 1.6 trillion miles between January and June 2019—1.1% more than the equivalent period in 2018. In the August update of its Short-Term Energy Outlook, EIA forecasts that U.S. drivers will drive 3.3 trillion miles in 2019, making 2019 the busiest year for automotive travel since at least 1970, according to data from the FHWA. Despite the increase in miles traveled, year-to-date product supplied—a proxy for consumption—of finished motor gasoline is slightly lower (-0.1%) compared with product supplied during the same period last year, likely driven by an expected 1.0% increase in fleet-wide vehicle fuel efficiency.

Industry Manufacturing

Earthquakes Prompt New Laws For Oklahoma

Oklahoma’s oil and gas regulator on Feb. 27 released new requirements aimed at reducing the risk of earthquakes from hydraulic fracturing in shale regions in central and southern areas of the state.

The new protocol, issued by the Oklahoma Corporation Commission, comes in addition to existing rules that apply to a 15,000 square mile area targeted by the regulator for its high rate of temblors from wastewater injection.

The new requirements are aimed at completion activities in the Scoop and Stack shale producing areas, where drilling is picking up as U.S. oil prices have climbed above $60 a barrel this year.

The state in recent years saw a surge in earthquakes due to the injection of saltwater produced from oil and gas drilling activities into disposal wells. In 2015, there were 903 magnitude 3.0 or higher earthquakes, vs. just 41 temblors of that intensity five years earlier, according to Oklahoma Geological Survey data.

Under the new rules, operators will be required to have access to a seismic array that gives real-time information on earthquakes. The rules also lower the threshold for which an operator must take action to a magnitude 2.0 quake from 2.5, and require some operators to pause operations for six hours in the event of a 2.5 magnitude quake.

Previously, operators were only required to pause operations for a magnitude 3.0 or higher quake.

There have been 80 earthquakes of magnitude 2.5 or greater in the Scoop and Stack area of Oklahoma since December 2016, Matt Skinner, public information manager for the Oklahoma Corporation Commission, said Feb. 27.

“Ultimately, the goal is to have enough information to develop plans that will virtually eliminate the risk of a felt earthquake from a well completion operation in the Scoop and Stack,” said Jeremy Boak, director of the Oklahoma Geological Survey, in a release. Earthquakes that fall below 2.5 magnitude are usually not felt but can be measured on seismographs.

Well completion activities are less likely to produce induced earthquakes than wastewater injection, geologists said in a release issued by the Oklahoma Corporation Commission on Feb. 27.

The Scoop and Stack have far less water associated with drilling activities than Oklahoma’s Arbuckle Formation, which was linked to a high rate of temblors from wastewater injection, they added.

The jump in earthquakes has drawn increased attention in recent years, particularly after some larger quakes have occurred near the massive oil storage hub of Cushing, Okla.