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 (think OPEC) and international policy shifts to hurricanes and consumer purchasing trends.
To understand the state of the global energy market, energy market expert Angie Olsonawski, CHS vice president of refined fuel operations and supply, spoke to more than 350 attendees at the CHS Annual Meeting, held Dec. 7-8 in Minneapolis, Minn.
“US 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,” says Olsonawski.
This increase in production offset some of the cuts from OPEC (Organization of Petroleum Exporting), which controls about 40 percent of the world’s crude oil production. “As OPEC producers have cut back from the market, the U.S. has stepped up,” says Olsonawski.
Optimistic projections for long-term growth in demand
Olsonawski also stressed many demand trends that 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 says. “However, an increase in fuel efficiency for all vehicles will continue to hamper some of this growth.”
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,” Olsonawski says.
The impact of electric vehicles
When it comes to energy use, vehicles powered by alternative energy sources are top-of-mind, including electric vehicles. “Despite increases in electric vehicle sales globally, these vehicles still account for less than 1 percent of the global passenger fleet.”
But, Olsonawski says, electricity can be a complicated energy source. “In the U.S., about 34 percent of electricity comes from natural gas; 30 percent is derived from coal; 20 percent 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.”
As the nation’s largest farmer-owned cooperative, CHS provides energy products for its member-owners through local co-ops and consumers through its 1,500 Cenex® retail locations. “Through our two refineries in McPherson, Kansas and Laurel, Montana, CHS produces 160,000 barrels per day and is a key player in the domestic fuel supply chain,” says Olsonawski. “At CHS, we’re constantly monitoring the market and economics to see how we can work smarter for our owners.”