New Jersey Petroleum Sector Overview

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New Jersey Petroleum Sector Overview

• Clinton J. Andrews
• E.J. Bloustein School of Planning and Public
  Policy
• Rutgers, The State University of New Jersey
• September 15, 2005
• http//policy.rutgers.edu/andrews

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Average NJ Regular Gas Prices
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U.S Gas Prices--Long Term
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Petroleum Price Problems

• Petroleum market suffers from dramatic and
  persistent price volatility.
• Unresponsive demand, lumpy supply, difficult to
  balance them.
• Both consumers and producers seek external
  interventions that improve price stability.

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5 Price Stabilization Regimes

• Standard Oil monopoly (
• Texas Railroad Commissions internationally
  influential pro-rationing of production (1930s)
• Seven Sisters cartel (Exxon, Shell, British
  Petroleum, Mobil, Chevron, Texaco, and Gulf)
  (1920s - 1970s)
• OPEC (1960 - present) effective only briefly
  during the 1970s-80s
• Saudi-American regime (1970s - present)

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Components of U.S. Gas Price
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Gasoline Market Price Lags (Lags cause an
appearance of downstream price stickiness)
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U.S. Average Profit Rates
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New Jersey - Consumption

• 10 in Population (8,698,879 in 2004)
• 4 in Per Capita Income (41,332 in 2004)
• 13 in Total Energy Consumption (2.5 quads in
  2001)
• 38 in Per Capita Energy Consumption (294 million
  Btu in 2001)
• 9 in Total Petroleum Consumption (26 million GPD
  in 2001)

• 11 in Gasoline Consumption (10.8 million GPD in
  2001)
• 11 in Distillate Fuel Consumption (4.4 million
  GPD in 2001)
• 14 in LPG Consumption (0.9 million GPD in 2001)
• 4 in Jet Fuel Consumption (3.9 million GPD in
  2001)

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New Jersey - Upstream Supply

• Crude oil reserves, production, wells, rigs None
• Major PipelinesLPG None Crude Oil
  NoneProduct Colonial, Buckeye, Sun

• Ports Jersey City, Sayreville, Sewaren, Perth
  Amboy, Linden, Carteret, Woodbridge, Elizabeth,
  Bayonne, Newark, Deepwater, Crab Point,
  Paulsboro, Gloucester, Camden, Pennsauken,
  Burlington, Duck Island

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NJ Petroleum Product Imports 2004 by Product
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New Jersey - Downstream Refining

• Total distillation capacity of 615,000 BCD (26
  million GPD) in 2005
• Amerada Hess (Port Reading _at_ -0- BCD)
• Chevron USA (Perth Amboy _at_ 80,000 BCD)
• Citgo Asphalt Refining (Paulsboro _at_ 51,000 BCD
  idle on 1/1/05)
• Sunoco (Westville _at_ 145,000 BCD)
• ConocoPhillips (Linden _at_230,000 BCD)
• Valero Refining NJ (Paulsboro _at_ 160,000 BCD)

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New Jersey - Retail

• Gasoline Stations3,608 outlets in 20052.1 of
  U.S. total
• Gas Taxes10.5 cents/gallon NJ tax(18.7
  cents/gallon wtd US average state tax)18.4
  cents/gallon Federal tax

• 19 of NJ homes are heated by oil. Note that NJ
  has a 1 million barrel heating oil reserve in
  Woodbridge.

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Classical Rationales for Governmental Action

• above all, do no harm
• Improve allocational efficiency (correct
  market failures like pollution)
• Improve distributional equity (correct gross
  unfairnesses like freezeouts)
• Improve macro stability (correct structural
  imbalances like trade deficits)
• Controversial enforce national norms, pursue
  national objectives, cater to special interests?

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Energy Policy Rationales

• Security improvements (reliability of supply,
  self-sufficiency, non-proliferation)
• Economic improvements (reasonable prices, less
  price volatility, job growth)
• Environmental improvements (climate change, air
  pollution, water pollution, land damage)

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Some Questions To Ask

• Is there documented price gouging in NJ?
• Are special product demands (e.g., jet fuel)
  affecting refineries ability to deliver
  gasoline, heating oil?
• Are high energy prices slowing economic growth?
• Is a new global price stabilization regime
  needed?
• How should NJ balance economic, security, and
  environmental objectives of energy policy in
  longer run?

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References

• Hinton, D. (2005) Petroleum Profile New Jersey,
  online at http//tonto.eia.doe.gov/oog/info/state/
  nj.html
• EIA (Energy Information Administration), U.S.
  Dept. of Energy (2005) Gasoline and Diesel Fuel
  Update, online at http//tonto.eia.doe.gov/oog/inf
  o/gdu/gasdiesel.asp
• EIA (Energy Information Administration), U.S.
  Dept. of Energy (2005a) Company Level Imports,
  online at http//www.eia.doe.gov/oil_gas/petroleum
  /data_publications/company_level_imports/cli.html.
  
• EIA (Energy Information Administration), U.S.
  Dept. of Energy (1999) Price Changes in the
  Gasoline Market, online at http//www.eia.doe.gov/
  oil_gas/petroleum/analysis_publications/pet_analys
  is_publications.html.

• EIA (Energy Information Administration), U.S.
  Dept. of Energy (2004) Where Does My Gasoline
  Come From?, online at http//www.eia.doe.gov/neic/
  brochure/gas04/gasoline.htm.
• FHA (Federal Highway Administration), U.S. Dept
  of Transportation (2003) Tax Rates on Motor Fuel,
  online at http//www.fhwa.dot.gov/ohim/mmfr/dec03/
  mf121tpg1.htm
• AAA (American Automobile Association) (2005) Fuel
  Gauger Report, online at http//www.fuelgaugerepor
  t.com/NJavg.asp.
• U.S. Department of Energy, Energy Information
  Administration, Energy in the United States 1635
  2000. Downloaded May 22, 2004 from
  http//www.eia.doe.gov/emeu/aer/eh/frame.html.
• R.A. Musgrave, The Theory of Public Finance. New
  York McGraw Hill, 1959.

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Appendix
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U.S. Energy Use, 1635-2000 (Quadrillion Btu)
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U.S. Energy Flows in 2004 Quadrillion Btu
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U.S. Petroleum Balance 1949-2000
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U.S. Petroleum Flows
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Origins of U.S. Oil Imports
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Worldwide Reserves
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Petroleum Balance of Trade 2001
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Basic Industry Flows
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Products Made from Crude Oil (gallons per 42
gallon barrel)
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Typical Refinery Yield
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U.S. Refining Capacity
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U.S. Cost of Crude Oil
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U.S. Gas Prices - Monthly
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NJ Retail Gas Prices 2000-2005
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PADD Regions
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Regional Refinery Capacity
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Regional Inventories
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Regional Movements
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Regional Imports
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Regional Consumption
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Reformulated Gasoline Areas