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Venezuela's crude oil production is declining amid economic instability


Venezuela's crude oil production has been on a downward trend for two decades, but has experienced significant decreases over the past two years. Crude oil production in Venezuela fell from an annual average of 3.2 million barrels per day (b/d) in 1997 to an average of 2.4 million b/d in 2015 (Figure 1). More recently, Venezuela's crude production fell from a monthly average of 2.3 million b/d in January 2016 to 1.6 million b/d in January 2018. A combination of relatively low global crude oil prices and mismanagement of Venezuela’s oil industry has led to the accelerated decline in production. Venezuela's economy is extremely dependent on oil revenue, so the production declines are having a negative impact on the country's finances as well.

Figure 1. Venezuela average annual crude oil production


Several indicators suggest that Venezuela's crude oil production will likely continue to decline in the near future. The number of active rigs has fallen from about 70 in the first quarter of 2016 to an average of 43 in the fourth quarter of 2017 (Figure 2). In addition, recent reports indicate that financial difficulties, such as missed payments to oil service companies, a lack of working upgraders, a lack of knowledgeable managers and workers, and declines in oil industry capital expenditures, have also contributed to production declines.

Figure 2. Venezuela monthly rig count


The United States is the largest importer of Venezuela's crude oil, receiving an average of 618,000 b/d in 2017, or about 41% of total Venezuelan exports. China and India received approximately 386,000 b/d and 332,000 b/d, respectively, in 2017. The remaining 186,000 b/d of exports during the year went to countries including Sweden, the United Kingdom, Germany, Cuba, Singapore, and others (Figure 3).

Figure 3. Venezuela monthly crude oil exports


Venezuela produces extra-heavy crude oil in the Orincoco Oil Belt area and relies extensively on imports of lighter liquids (diluents) to blend with this crude oil to make it marketable. Financial difficulties have recently prevented the state-owned oil company, Petroleos de Venezuela SA (PdVSA), from importing the necessary volumes of diluent on several occasions to sustain production and exports.


In 2017, refiners in the United States and Asia reported crude oil quality issueswith imported crude oil from Venezuela, resulting in requests for discounts or discontinuation of purchases. Venezuela's crude oil exports to the United States fell from 840,000 b/d in December 2015 to 437,000 b/d in December 2017 (the latest month for which EIA import data are available). As recently as September 2017, Venezuela was the third-largest supplier of U.S. crude oil imports after Canada and Saudi Arabia, occupying a top-three spot since 2015. In December 2017, Venezuela fell behind Canada, Saudi Arabia, Mexico, and Iraq based on average imported volumes of crude oil during the month.


The fall in exports to the United States is especially harmful to Venezuela's economy because U.S. refiners are among the few customers that still remit cash payments to Venezuela. Some volumes shipped to China, for example, are sent as loan repayments. In January 2018, Venezuela exported about 360,000 b/d of crude oil to China, based on tanker tracking data. Venezuela's exports to India—also a cash remitting customer—have fallen to the lowest levels in about five years. In January, only about 220,000 b/d of Venezuelan crude oil was destined for India, about 20% lower than the level in January 2017, according to crude oil shipping data. This level includes volumes sent to Essar’s Vadinar refinery in India to service debt that Venezuela owes to Russian oil company Rosneft (Rosneft co-owns the Vadinar refinery).


Although the Venezuelan government has not published any economic data in more than two years, Venezuela's National Assembly reported in mid-March that inflation was more than 6,000% between February 2017 and February 2018. The International Monetary Fund projects that inflation will reach 13,000% in 2018 and that Venezuela's economy will contract 15%, resulting in a cumulative GDP decline of nearly 50% from 2013 through the end of 2018.


Venezuela also has high levels of debt with a variety of creditors. During the last quarter of 2017, when Venezuela was late making some bond payments, the main rating agencies declared the country in selective default . Venezuela has more than $8 billion in bond payments coming due in 2018. Given the country's precarious financial situation, a general default is possible. In addition to about $64 billion worth of debt in traded bonds, Venezuela owes $26 billion to creditors and $24 billion in commercial loans, according to Torino Capital, although some estimates place Venezuelan debt as high as $150 billion.


Venezuela's crude oil production is projected to continue to fall through at least the end of 2019, reflecting that crude oil production losses are increasingly widespread and affecting joint ventures. These projections reflect that crude oil production losses are increasingly widespread and affecting joint ventures. With the reduced capital expenditures, foreign partners are limiting activities in the Venezuelan oil sector. Venezuela's economy is heavily dependent on the oil industry, and production declines result in reduced oil export revenues. Venezuela's economy contracted by nearly 9% in 2017, based on estimates from Oxford Economics.


U.S. average regular gasoline and diesel prices increase


The U.S. average regular gasoline retail price rose 5 cents from the previous week to $2.65 per gallon on March 26, 2018, up 33 cents from the same time last year. Rocky Mountain prices increased nearly nine cents to $2.53 per gallon, Gulf Coast prices increased nearly eight cents to $2.38 per gallon, West Coast and East Coast prices each increased nearly six cents to $3.27 per gallon and $2.59 per gallon, respectively, and Midwest prices increased two cents to $2.52 per gallon.


The U.S. average diesel fuel price rose nearly 4 cents to $3.01 per gallon on March 26, 2018, 48 cents higher than a year ago. Rocky Mountain prices rose nearly seven cents to $2.99 per gallon, West Coast prices increased over five cents to $3.44 per gallon, Gulf Coast and Midwest prices each increased nearly four cents to $2.82 per gallon and $2.93 per gallon, respectively, and East Coast prices increased nearly three cents to $3.04 per gallon.

Propane/propylene inventories decline

U.S. propane/propylene stocks decreased by 1.2 million barrels last week to 35.6 million barrels as of March 23, 2018, 9.7 million barrels (21.4%) lower than the five-year average inventory level for this same time of year. East Coast and Midwest inventories each decreased by 0.5 million barrels, while Gulf Coast inventories decreased by 0.2 million barrels. Rocky Mountain/West Coast inventories rose slightly, remaining virtually unchanged. Propylene non-fuel-use inventories represented 8.2% of total propane/propylene inventories.


Residential heating oil prices increase, propane prices decrease


As of March 26, 2018, residential heating oil prices averaged almost $3.10 per gallon, nearly 4 cents per gallon higher than last week and 51 cents per gallon higher than last year's price at this time. The average wholesale heating oil price for this week averaged almost $2.12 per gallon, nearly 11 cents per gallon higher than last week and 52 cents per gallon higher than a year ago.


Residential propane prices averaged $2.48 per gallon, almost one cent per gallon lower than last week but nine cents per gallon higher than a year ago. Wholesale propane prices averaged $0.88 per gallon, 1 cent per gallon higher than last week and nearly 21 cents per gallon higher than last year's price. This is the last data collection for the 2017-2018 State Heating Oil and Propane Program (SHOPP) heating season. Data collection will resume on October 1, 2018 for publication on Wednesday, October 3, 2018.


For questions about This Week in Petroleum, contact the Petroleum Markets Team at 202-586-4522.

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The United States consumed a record amount of renewable energy in 2019

In 2019, consumption of renewable energy in the United States grew for the fourth year in a row, reaching a record 11.5 quadrillion British thermal units (Btu), or 11% of total U.S. energy consumption. The U.S. Energy Information Administration’s (EIA) new U.S. renewable energy consumption by source and sector chart published in the Monthly Energy Review shows how much renewable energy by source is consumed in each sector.

In its Monthly Energy Review, EIA converts sources of energy to common units of heat, called British thermal units (Btu), to compare different types of energy that are more commonly measured in units that are not directly comparable, such as gallons of biofuels compared with kilowatthours of wind energy. EIA uses a fossil fuel equivalence to calculate primary energy consumption of noncombustible renewables such as wind, hydro, solar, and geothermal.

U.S. renewable energy consumption by sector

Source: U.S. Energy Information Administration, Monthly Energy Review

Wind energy in the United States is almost exclusively used by wind-powered turbines to generate electricity in the electric power sector, and it accounted for about 24% of U.S. renewable energy consumption in 2019. Wind surpassed hydroelectricity to become the most-consumed source of renewable energy on an annual basis in 2019.

Wood and waste energy, including wood, wood pellets, and biomass waste from landfills, accounted for about 24% of U.S. renewable energy use in 2019. Industrial, commercial, and electric power facilities use wood and waste as fuel to generate electricity, to produce heat, and to manufacture goods. About 2% of U.S. households used wood as their primary source of heat in 2019.

Hydroelectric power is almost exclusively used by water-powered turbines to generate electricity in the electric power sector and accounted for about 22% of U.S. renewable energy consumption in 2019. U.S. hydropower consumption has remained relatively consistent since the 1960s, but it fluctuates with seasonal rainfall and drought conditions.

Biofuels, including fuel ethanol, biodiesel, and other renewable fuels, accounted for about 20% of U.S. renewable energy consumption in 2019. Biofuels usually are blended with petroleum-based motor gasoline and diesel and are consumed as liquid fuels in automobiles. Industrial consumption of biofuels accounts for about 36% of U.S. biofuel energy consumption.

Solar energy, consumed to generate electricity or directly as heat, accounted for about 9% of U.S. renewable energy consumption in 2019 and had the largest percentage growth among renewable sources in 2019. Solar photovoltaic (PV) cells, including rooftop panels, and solar thermal power plants use sunlight to generate electricity. Some residential and commercial buildings heat with solar heating systems.

October, 20 2020
Natural gas generators make up largest share of U.S. electricity generation capacity

operating natural-gas fired electric generating capacity by online year

Source: U.S. Energy Information Administration, Annual Electric Generator Inventory

Based on the U.S. Energy Information Administration's (EIA) annual survey of electric generators, natural gas-fired generators accounted for 43% of operating U.S. electricity generating capacity in 2019. These natural gas-fired generators provided 39% of electricity generation in 2019, more than any other source. Most of the natural gas-fired capacity added in recent decades uses combined-cycle technology, which surpassed coal-fired generators in 2018 to become the technology with the most electricity generating capacity in the United States.

Technological improvements have led to improved efficiency of natural gas generators since the mid-1980s, when combined-cycle plants began replacing older, less efficient steam turbines. For steam turbines, boilers combust fuel to generate steam that drives a turbine to generate electricity. Combustion turbines use a fuel-air mixture to spin a gas turbine. Combined-cycle units, as their name implies, combine these technologies: a fuel-air mixture spins gas turbines to generate electricity, and the excess heat from the gas turbine is used to generate steam for a steam turbine that generates additional electricity.

Combined-cycle generators generally operate for extended periods; combustion turbines and steam turbines are typically only used at times of peak load. Relatively few steam turbines have been installed since the late 1970s, and many steam turbines have been retired in recent years.

natural gas-fired electric gnerating capacity by retirement year

Source: U.S. Energy Information Administration, Annual Electric Generator Inventory

Not only are combined-cycle systems more efficient than steam or combustion turbines alone, the combined-cycle systems installed more recently are more efficient than the combined-cycle units installed more than a decade ago. These changes in efficiency have reduced the amount of natural gas needed to produce the same amount of electricity. Combined-cycle generators consume 80% of the natural gas used to generate electric power but provide 85% of total natural gas-fired electricity.

operating natural gas-fired electric generating capacity in selected states

Source: U.S. Energy Information Administration, Annual Electric Generator Inventory

Every U.S. state, except Vermont and Hawaii, has at least one utility-scale natural gas electric power plant. Texas, Florida, and California—the three states with the most electricity consumption in 2019—each have more than 35 gigawatts of natural gas-fired capacity. In many states, the majority of this capacity is combined-cycle technology, but 44% of New York’s natural gas capacity is steam turbines and 67% of Illinois’s natural gas capacity is combustion turbines.

October, 19 2020
EIA’s International Energy Outlook analyzes electricity markets in India, Africa, and Asia

Countries that are not members of the Organization for Economic Cooperation and Development (OECD) in Asia, including China and India, and in Africa are home to more than two-thirds of the world population. These regions accounted for 44% of primary energy consumed by the electric sector in 2019, and the U.S. Energy Information Administration (EIA) projected they will reach 56% by 2050 in the Reference case in the International Energy Outlook 2019 (IEO2019). Changes in these economies significantly affect global energy markets.

Today, EIA is releasing its International Energy Outlook 2020 (IEO2020), which analyzes generating technology, fuel price, and infrastructure uncertainty in the electricity markets of Africa, Asia, and India. A related webcast presentation will begin this morning at 9:00 a.m. Eastern Time from the Center for Strategic and International Studies.

global energy consumption for power generation

Source: U.S. Energy Information Administration, International Energy Outlook 2020 (IEO2020)

IEO2020 focuses on the electricity sector, which consumes a growing share of the world’s primary energy. The makeup of the electricity sector is changing rapidly. The use of cost-efficient wind and solar technologies is increasing, and, in many regions of the world, use of lower-cost liquefied natural gas is also increasing. In IEO2019, EIA projected renewables to rise from about 20% of total energy consumed for electricity generation in 2010 to the largest single energy source by 2050.

The following are some key findings of IEO2020:

  • As energy use grows in Asia, some cases indicate more than 50% of electricity could be generated from renewables by 2050.
    IEO2020 features cases that consider differing natural gas prices and renewable energy capital costs in Asia, showing how these costs could shift the fuel mix for generating electricity in the region either further toward fossil fuels or toward renewables.
  • Africa could meet its electricity growth needs in different ways depending on whether development comes as an expansion of the central grid or as off-grid systems.
    Falling costs for solar photovoltaic installations and increased use of off-grid distribution systems have opened up technology options for the development of electricity infrastructure in Africa. Africa’s power generation mix could shift away from current coal-fired and natural gas-fired technologies used in the existing central grid toward off-grid resources, including extensive use of non-hydroelectric renewable generation sources.
  • Transmission infrastructure affects options available to change the future fuel mix for electricity generation in India.
    IEO2020 cases demonstrate the ways that electricity grid interconnections influence fuel choices for electricity generation in India. In cases where India relies more on a unified grid that can transmit electricity across regions, the share of renewables significantly increases and the share of coal decreases between 2019 and 2050. More limited movement of electricity favors existing in-region generation, which is mostly fossil fuels.

IEO2020 builds on the Reference case presented in IEO2019. The models, economic assumptions, and input oil prices from the IEO2019 Reference case largely remained unchanged, but EIA adjusted specific elements or assumptions to explore areas of uncertainty such as the rapid growth of renewable energy.

Because IEO2020 is based on the IEO2019 modeling platform and because it focuses on long-term electricity market dynamics, it does not include the impacts of COVID-19 and related mitigation efforts. The Annual Energy Outlook 2021 (AEO2021) and IEO2021 will both feature analyses of the impact of COVID-19 mitigation efforts on energy markets.

Asia infographic, as described in the article text


Source: U.S. Energy Information Administration, International Energy Outlook 2020 (IEO2020)
Note: Click to enlarge.

With the IEO2020 release, EIA is publishing new Plain Language documentation of EIA’s World Energy Projection System (WEPS), the modeling system that EIA uses to produce IEO projections. EIA’s new Handbook of Energy Modeling Methods includes sections on most WEPS components, and EIA will release more sections in the coming months.

October, 16 2020