Power plants in Saudi Arabia burned an average 0.4 million barrels per day (b/d) of crude oil in 2018 directly for power generation, the lowest amount since at least 2009, the earliest year that data are available from the Joint Organizations Data Initiative (JODI, Figure 1). According to the JODI data, compared with all other countries, Saudi Arabia burns by far the largest amount of crude oil directly for power generation. Between 2015 and 2017, Iraq used the second-largest amount of crude oil for power generation (over 150,000 b/d on average), but has significantly reduced its direct crude burn since then.
During the summer months, Saudi Arabia typically experiences an increase in electricity consumption as domestic demand for air conditioning rises. Saudi Arabia relies on crude oil and other fossil fuels, such as petroleum products and natural gas, for power generation. Saudi Arabia's direct crude burn reached a record high during the summer of 2015, averaging 0.9 million b/d from June to August. In comparison, direct crude burn in the summer of 2018 was 41% lower at 0.5 million b/d.
Despite continued, steady increases in both population and electricity consumption, Saudi Arabia managed to reduce its reliance on crude oil for power generation by increasing the use of other energy sources, such as natural gas and fuel oil. Most of the natural gas that Saudi Arabia produces is associated gas, which is natural gas produced along with crude oil from an oil well. In recent years, however, nonassociated natural gas production has increased. The Wasit gas plant reached its full operating capacity of 2.5 billion cubic feet per day (Bcf/d) in 2016. The plant was built to process nonassociated gas, which it is currently processing from the Hasbah and Arabiyah offshore gas fields, both of which began production in 2016. Saudi Arabia is investing in more natural gas processing capacity, including the construction of the Fadhili gas plant, which will be able to process nonassociated natural gas from both on- and offshore fields. The Fadhili gas plant is expected to be completed by the end of 2019 with a capacity of 2.5 Bcf/d. Consumption of natural gas in Saudi Arabia has steadily increased, averaging 10.6 Bcf/d in 2017, the latest year for which data are available (Figure 2).
In addition to natural gas, Saudi Arabia has also been using fuel oil as a partial replacement of crude oil in power generation. High-sulfur fuel oil is a relatively cheap petroleum product that can be used to fuel marine vessels and can also be used for power generation. However, because of environmental concerns and competition with other fuels, fuel oil consumption has been generally declining in most regions in the world. In Saudi Arabia, however, fuel oil consumption rose 25% between 2015 and 2018 to 0.5 million b/d on average, according to JODI data. Some trade press reports indicate that one potential side effect of the upcoming changes to the sulfur limits in marine fuels in 2020 is that the stranded high-sulfur fuel oil could be sent to Saudi Arabia to further replace crude oil in power generation.
With less crude oil directly being used for power generation, more crude oil is available for domestic refining and exports. For many years, Saudi Arabia has been working to increase its domestic refinery capacity. Saudi Arabia is able to process 2.9 million b/d of crude oil domestically, which will rise further after the startup of the 400,000-b/d Jazan refinery, which may come online in 2019. Because of its refinery additions, Saudi Arabia has been able to process more of its crude oil domestically. Crude oil refinery runs averaged roughly 1.8 million b/d in 2009 and subsequently rose to an average of 2.6 million b/d by 2018, according to JODI data (Figure 3).
As a result of increased refinery runs, Saudi Arabia was also able to increase the amount of petroleum products it could export. Exports of petroleum products more than quadrupled between 2009 and 2018, from 0.4 million b/d to 2.0 million b/d. Saudi Arabia exports more diesel than any other petroleum product, averaging 0.8 million b/d in 2018. Gasoline and fuel oil were the next two most exported petroleum products in 2018 at 0.4 million b/d and 0.3 million b/d, respectively. Saudi Arabia also imports petroleum products; however, over the past several years, Saudi Arabia has generally become a net exporter of most products, according to JODI data.
In addition to refining more crude oil domestically, using less crude oil in power generation can enable Saudi Arabia to increase crude oil exports, if needed. However, in late 2016 and in late 2018, Saudi Arabia, along with other members of the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC countries, agreed to voluntarily cut crude oil production in order to prevent further declines in crude oil prices. These agreements resulted in lower production of crude oil in Saudi Arabia, which is a more significant factor in how much crude oil the country has available to export throughout the year (Figure 4).
Furthermore, Saudi Arabia has been cutting production beyond its agreed-upon target, meaning that as Saudi Arabia's crude oil production falls, production of associated natural gas will also decline. Declines in associated natural gas production could result in an increased need for crude oil used for power generation.
U.S. average regular gasoline and diesel prices increase
The U.S. average regular gasoline retail price rose nearly 5 cents from the previous week to $2.89 per gallon on April 29, 4 cents higher than the same time last year. The Rocky Mountain price rose over 8 cents to $2.84 per gallon, the East Coast and Gulf Coast prices both increased nearly 5 cents to $2.78 per gallon and $2.58 per gallon, respectively, and the Midwest and West Coast prices each rose over 4 cents to $2.77 per gallon and $3.67 per gallon, respectively.
The U.S. average diesel fuel price increased more than 2 cents to $3.17 per gallon on April 29, 1 cent higher than a year ago. The Rocky Mountain price increased 4 cents to $3.18 per gallon, the West Coast price increased more than 3 cents to $3.73 per gallon, the Gulf Coast and East Coast prices increased 2 cents to $2.94 per gallon and $ 3.19 per gallon, respectively, and the Midwest price increased nearly 2 cents to $3.06 per gallon.
Propane/propylene inventories rise
U.S. propane/propylene stocks increased by 1.2 million barrels last week to 58.9 million barrels as of April 26, 2019, 10.3 million barrels (21.1%) greater than the five-year (2014-2018) average inventory levels for this same time of year. Midwest, Rocky Mountain/West Coast, and East Coast inventories increased by 0.9 million barrels, 0.2 million barrels, and 0.1 million barrels, respectively, and Gulf Coast inventories increased slightly, remaining virtually unchanged. Propylene non-fuel-use inventories represented 9.6% of total propane/propylene inventories.
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