Yesterday, I took up the question of whether, now that the recession is over according to most observers, oil demand has started to recover or not in developed countries. Clearly, relying on agency data for demand back in August is not the most satisfactory thing when trying to answer that question in December. So I tried working with the US weekly numbers for refinery production. However, looking at the year-on-year changes as I did yesterday is also a little unsatisfactory as that incorporates the effects of the whole last of the year, whereas we want to know what's happening specifically in the last few months. So in this post, I want to show a seasonally adjusted version of that data (I had to do my own seasonal adjustment using a simple approach I found here that seemed pretty reasonable to me).
Just to be clear, I'm taking the weekly data from the EIA and adding up the gasoline, distillate, jet fuel, residual fuel oil, components to get an overall number for refinery production of liquid fuels. Here's that series over the long term:
First I removed a couple of obvious outliers (replacing the missing data with a linear interpolation) and then computed a 1 year centered moving average:
Just to caution the reader - the first and last six months of the moving average are not supported by the full seasonal window, so it would be quite dangerous to draw conclusions from that (in data that is clearly strongly seasonal).
Next I derived the seasonal adjustment factors (the average over 1991-2008 of the ratio of the data to the moving average for each week of the year):
So finally we get the seasonally adjusted data. It's pretty noisy, so I also added a 27 week centered moving average in an attempt to tease out the trend from the noise, as well as grey bars corresponding to recessions from the NBER, with my best guess of the most recent recession lasting through June 2009.
I think the best you could say is that US oil demand had stabilized in the last few months, but not yet started to grow again. That seems roughly similar to the picture with employment.
Great work Stuart! I feel that renewed oil demand may be the key overlooked component in the health of the U.S. and for that matter the global economy. I fear that as the economies of the world recover, and oil consumption returns to pre crash levels, the resulting rise in oil prices will trigger yet another crash. I feel economies have limits on the percentage of GDP that can be spent on energy and remain functioning. Again thanks so much for your work it is appreciated.
ReplyDeleteStuart, not saying the picture would be much different, but why did you use the refinery input numbers instead of the weekly product supplied numbers?
ReplyDeleteThe US is a net importer of finished petroleum products. However, in the last year or two, exports have risen sharply while imports have trended down.
"refinery output numbers" that should have been.
ReplyDeleteHere's the link to the product supplied data which incorporates export/import calculations for you.
Datamunger - hmm, I poked around on the EIA website and somehow I only found monthly product supplied numbers which ended a couple of months back. Guess I didn't look hard enough.
ReplyDeleteThat would have been preferable, but I guess like you I doubt the answer to the question I was asking would have been very different.
Hi Mark - welcome, and yeah, I'm with you there.
ReplyDeleteDunno about the refinery data, but the difference between the first weekly estimate of product supplied and the final revised monthly figure can be enormous. For April '08 it got close to 900,000 mpd. (4%ish) Those sorts of revisions persisted through spring, summer and fall of '08, possibly contributing to the oil bubble since it looked for a while that oil was more inelastic than ever. It gave rise to what I dubbed the Cold Dead Hands Theory of US oil consumption.
ReplyDeleteOne analyst explained that it is not against the law to lie to EIA and vendors were trying to cover up the damage to their biz. He had switched to using California data (where there are penalties) to try to judge the size of the inflection.
Vendors may not have incentive to downsize their sales, though. I haven't keep track of the revisions since last summer. Things could be better lately. The first monthly estimates appear in the EIA's Monthly Energy Review . The values that appear on the web under monthly Product Supplied are the final revised estimates. They don't change.
I guess I should add that the weekly data is based on a sample, however the final monthly data is an attempt to count everything.
ReplyDeleteDatamunger - fascinating caveats. I'll try to take a look at the weekly product supplied estimates over the weekend, and see if they tell the same story or not.
ReplyDeleteI'm also intrigued to look at how correlated this data is with employment. It kind of looks to me that the "jobless recovery" phenomonen following the last few recessions shows up in this data (from a hasty eyeball anyway).