The use of fuel and energy products powers much of the American economy, but energy markets are notoriously volatile, reacting quickly to everything from statements by global organizations like the Organization for Petroleum Exporting (OPEC) and international policy shifts to hurricanes and consumer purchasing trends.
To provide an understanding of the state of the global energy market, expert Angie Olsonawski, CHS vice president of refined fuel operations and supply, recently spoke to more than 350 attendees at the CHS annual meeting.
“U.S. oil production recently reached 9.7 million barrels per day. We haven’t seen those levels since 1971 and are on pace to set a record for production in 2018,” Olsonawski said.
This increase in production offset some of cuts from OPEC, which controls about 40% of the world’s crude oil production, she noted, adding, “As OPEC producers have cut back from the market, the U.S. has stepped up.”
Optimism for long-term demand growth
Olsonawski said many demand trends will continue to fuel growth in the energy market.
“U.S. consumers continue to buy big vehicles. Americans are buying more SUVs, trucks and crossovers compared to smaller vehicles and sedans. This is a lift for demand fuel markets,” she explained. “However, an increase in fuel efficiency for all vehicles will continue to hamper some of this growth.”
She said the largest demand for petroleum comes from developing countries, most notably China and India.
“We’re seeing this growth for demand along with population growth,” she noted.
Olsonawski said vehicles powered by alternative energy sources, including electric vehicles, are top-of-mind when it comes to energy use.
“Despite increases in electric vehicle sales globally, these vehicles still account for less than 1% of the global passenger fleet,” she acknowledged.
Still, Olsonawski said, electricity can be a complicated energy source.
“In the U.S., about 34% of electricity comes from natural gas; 30% is derived from coal; 20% of electricity comes from nuclear power. It’s a more complex debate than just plugging in your car instead of going to the fuel pump,” she noted.
As the nation’s largest farmer-owned cooperative, CHS is a key player in the fuel supply chain. As such, it stays abreast of both the domestic and global picture.
“Through our two refineries in McPherson, Kan., and Laurel, Mont., CHS produces 160,000 barrels per day and is a key player in the domestic fuel supply chain,” Olsonawski said. “At CHS, we’re constantly monitoring the market and economics to see how we can work smarter for our owners.”