Made in America, it has a flat liner and damping

The U.S. manufacturing sector has barely grown since the outbreak, which explains anemic diesel consumption. The situation did not improve as expected at the beginning of the year.

According to Federal Reserve estimates, production rose faster than expected by 0.9% in May after seasonal adjustments. However, this followed further declines of -0.4% in April and -0.1% in March.

Production was virtually unchanged from the previous year, and there has been no significant net growth since 2018.

The U.S. manufacturing sector has recovered from disruptions caused by the China trade war in 2018 and the pandemic that hit the U.S. in 2020, but production is no higher than before the disruptions.

The Federal Reserve measures production in terms of volume, but the same growth is reflected in the U.S. Bureau of Economic Analysis’s measure of value added.

Inflation-adjusted manufacturing value added will be $2.29 trillion by 2023, up from $2.21 billion in 2018. That’s an increase of just $77 billion over five years.

Since 2018, real value added in industry has been growing at a rate of 0.7% per year. This is well below the economy’s growth of 2.1% and the private sector’s growth of 2.3%.

The value added of the manufacturing sector in the entire economy decreased from 11.0% to 10.2% in 2018–2023.

American production charts

More than three quarters of diesel and other distilled oil are consumed by rail and road freight carriers, as well as industrial consumers.

It is not surprising that since 2018, the sales volume of distilled oil on the domestic market has barely increased.

In 2023, the total volume of distillates delivered to U.S. consumers from crude oil and renewable sources increased by just 42,000 barrels per day (b/d), or 1%.

The volume of distillates produced from petroleum sources actually decreased by 213,000 barrels per day (5%), due to the growth of biodiesel and renewable diesel.

Another factor influencing the consumption of distillate is the gradual switch from heating oil to gas in residential and commercial buildings.

The exceptionally mild winter of 2023/24 also had an impact on distillate consumption over the last 12 months.

The manufacturing sector finally recovered from the long but shallow downturn that occurred in 2022 and 203, but the recovery was too weak to boost diesel use.

The U.S. manufacturing sector is not growing fast enough to offset declines in oil demand due to biofuels, efficiency improvements and other factors.

According to the US Energy Information Administration, there will be no significant increase in demand for distillates in 2024 and 2025 (Short-term Energy Outlook, EIA of June 11).

Sluggishness in the US manufacturing sector is one of the factors that caused global oil consumption to be lower than forecasts at the beginning of the year and led to a decline in oil prices.

Related columns

U.S. Refinery Margins Fall as Fuel Stockpiles Grow (June 13, 2024)

US producers suspend recovery, but use diesel fuel moderately (June 7, 2024)

– Renewable fuels reduce diesel consumption in the US (May 10, 2024)

US manufacturers fight to grow without interest rate cuts (March 5, 2020)

John Kemp is a market analyst. His views are his. Follow his commentary on X https://twitter.com/JKempEnergy