WASHINGTON – A recent American Petroleum Institute (API) report indicates that record high crude oil prices led to lower U.S. refined product demand in the first half of 2006 in the United States, even though the nation imported more gasoline than ever before, said the group in its June Monthly Statistical Report.

 “Once again we have seen sharp increases in the price of gasoline and diesel fuel.  And, once again, it is due to the fundamental forces of supply and demand--tight world markets for crude oil and high prices, a higher cost of refining and distributing gasoline, a switch to ethanol blends, and sulfur content changes in diesel fuel,” said API Chief Economist John Felmy.

U.S. gasoline demand, as measured by API as deliveries out of the primary distribution system of refineries, bulk terminals and pipelines, declined in the second quarter by 0.4 percent, contrasting with a 0.5 percent increase in the first quarter of the year.

“Our figures show that consumers, facing higher gasoline prices, apparently found ways to drive less and to use fuel more efficiently,” said API Manager of Statistical Information and Analysis Ronald J. Planting. 

Overall, API reports that U.S. refined product demand slumped 1.3 percent in the first six months of 2006 as deliveries for most products were flat to lower than levels just one year ago. The exception was for on-highway diesel fuel amid an economic growth-led increase in the volume of goods transported by truck to consumers.

U.S. refiners started producing substantial quantities of ultra low sulfur diesel (ULSD) in June--more than 2 million barrels of ULSD per day by month's end. 

API notes that gasoline imports reached a record 1.26 million barrels per day, which his 18.8 percent above the first half of 2005, as foreign supplies were needed to offset the lingering hurricane impact on domestic refineries. Total refined product imports in the first six months of the year were more than 12 percent above year-ago levels to average 3.52 million barrels per day.

By the end of June, last year’s hurricanes continued to have a lingering effect on domestic crude oil production. For the first time in a year, refinery inputs, an overall measure of plant activity, rose above 16 million barrels per day in June to stand at 16.3 million barrels per day--the fifth highest monthly average level ever recorded. Gasoline production also reached a record of nearly 9.2 million barrels per day in June. 

Meanwhile, the U.S. Energy Information Administration (EIA), in its July 19 edition of This Week in Petroleum, notes that gasoline demand over the last four weeks was up 1.9 percent compared to a year ago, but that demand may have been greater if prices had not been elevated. “However, available data suggest that gasoline prices have not yet reached a level high enough to result in an absolute decline in demand, particularly given a robust economy,” notes EIA.