Michigan
Petroleum and Energy Supply Update
David Svanda, Commissioner
Michigan Public Service Commission &
President, National Association of Regulatory Utility
Commissioners
Jeffrey Pillon, Manager, Energy Data & Security
Michigan Public Service Commission
March 21, 2003
Michigan Energy Expenditures
Total $19.8 Billion
Electricity
38%
Coal nonutility
1%
Natural Gas
19%
Source: EIA State Energy Price and Expenditure Report
Petroleum
42%
Michigan Energy Use by Type and Sector
By Sector
Transp.
34%
Industrial
22%
Source: State Energy Data Reports
By Fuel
Ind. Coal
1%
Residential
25%
Electricity
35%
Natural Gas
22%
Commercial
19%
Petroleum
42%
Michigan Electricity Generation
by Source of Energy, 1999
Source
Coal
Nuclear
Natural Gas
Petroleum
Hydroelectric
Other
Megawatt hours
70,501,323
14,590,711
13,411,817
1,486791
525,859
2,833,877
Hydroelectric
1%
Nuclear
14%
Natural Gas
13%
Megawatts
12,556
4,332
3,921
2,641
2,141
80
417
Coal
68%
Petroleum
1%
Michigan Electricity Generation
Capacity by Source 1999
Source
Coal
Natural Gas
Nuclear
Petroleum
Hydroelectric
Pet/Gas Combine
Other
Other
3%
Hydro
8%
Petroleum
10%
Nuclear
15%
Natural Gas
17%
Pet/Gas
Combined
0%
Other
2%
Coal
48%
Residential Space Heating by Fuel Type in Michigan
Number of Homes and % of Total
• Natural Gas - 2,961,000 78%
• Propane - 358,000 9.4%
• Electric - 251,000 7%
• Fuel Oil - 131,000 3%
• Other - 85,000 2%
Source: 2000 Census of Housing
Michigan Petroleum Overview


Petroleum Supply (Upstream)
 Crude Oil Production: 20,000 barrels per day (2001),
ranked 17th (18th including Federal Offshore). Accounts for
about 3% of U.S. crude oil production.
 Total Producing Oil Wells: 3,700 (2001)
Major Pipelines:
 Crude Oil - Lakehead, Shell, Marathon
 Product - Buckeye, Marathon, Wolverine, BP Amoco
 Liquefied Petroleum Gas - Cochin, Shell, Lakehead
Michigan Petroleum Overview Cont.

Ports & Waterway Systems


Detroit (Port), Trenton (Port), Wyandotte (Port), Ecorse (Port),
River Rouge (Port), Dearborn (Port), Essexville (Port), Bay City
(Port), Ludington (Port), Muskegon (Port), Escanaba (Port)
Refining & Marketing (Downstream)


Refineries: Marathon Ashland Petro LLC Detroit @ 74,000 barrels
per calendar day
Gasoline Stations: 5,193 outlets (2002), or about 3% of U.S.
total
Sources and notes: Energy Information Administration, Bureau of Census, and
National Petroleum News "Market Facts 2001." Rankings include the District of Columbia.
Michigan Total Petroleum Use and
Crude Oil Production
Millions of Barrels per year
250
Total Petroleum Use
200
150
100
50
Michigan Crude Oil Production
0
01
20
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
19
83
19
81
19
79
19
77
19
75
19
Michigan Petroleum Use by Fuel Type
207,214 thousands barrels consumed in 1999
Distillate Fuel
17%
LPG - Propane
8%
Jet Fuel
5% Asphalt & Road
Oil
Lubricants 4%
Gasoline
63%
Source: State Energy Data Reports
2%
Residual Oil
1%
Michigan Petroleum Product
Pipelines
There are no pipelines
in the Upper Peninsula
which is supplied by
tanker truck from
pipeline terminal in
Green Bay Wis.
Alma
8"
ine 8"
Wolver
"
e8
ST. CLAIR
Su
n
Lansing
rin
lve
Wo
Marathon 1
0"
OTTAWA
8"
Buckeye 8"
keye
Buc
LIVINGSTON
MACOMB
OAKLAND
WASHTENAW
16"
e
n
ri
lve
o
W
"
10
o
oc
Am
WAYNE
JACKSON
MONROE
The yellow shaded area
shows the counties
where 7.8 Reid Vapor
Pressure (RVP)
gasoline is required.
The balance of the
Sun 6" lines state used 9.0 RVP
Buckeye 12 "
Sun two 8" lines
Refineries
Pipeline terminals
Marine Terminals
Sources of World Oil Supply, 2001
Venezuela – 2.9 m/b/d or 3.8% of world supplies
Iraq – 2.4 m/b/d or 3.2% of world supplies
Total World Oil Production 76.7 m/b/d
9.0
8.8
8.0
8.0
6.0
3.7
4.0
3.6
3.3
2.9
2.8
2.4
2.3
2.3
2.0
Source: Energy Information Administration
Em
ria
Ni
ge
ira
te
s
aq
Ir
Ar
ab
Un
ite
d
Ca
na
da
a
Ve
ne
zu
el
in
a
Ch
ico
M
ex
an
Ir
a
iA
ra
bi
SR
Sa
ud
US
m
er
Fo
r
d
St
at
es
0.0
Un
ite
million barrels per day
10.0
Source of U.S. Oil Supply
19.7 million barrels per day 2001
Mexico
7%
Other Non-OPEC
15%
Canada
9%
Saudi Arabia
8%
OPEC
27%
Venezuela
8%
Iraq
4%
Nigeria
4%
Domestic
42%
Other OPEC
3%
Positive World Oil Supply Factors
Venezuelan production is now up to at least 2.4 million barrels per day (m/b/d), from 614,000 barrels
per day in January.
Saudi production up to 9.2 m/b/d in March, from 8.7 m/b/d in January
Saudi Arabia has stockpiled nearly 50-mil bbl of oil which it will use if war disrupts Iraqi exports, the
New York Times reported Tuesday.
Global Seasonal decline in oil demand is in the range of 2-3 m/b/d
Strategic Petroleum Reserve at nearly 600 million barrels, and is capable of being drawn down at a
maximum rate of 4.3 m/b/d
Million of Barrels per day
5
Spare Capacity 4.1
Production levels
first nine months
of 2002
4
4.3
3.5
2.9
3
2
Previous oil supply disruptions
2.6
2.4
1.5
1
0
OPEC
SPR
Venezuela
Iraq
1973
1979
1991
Risk Factors







Uncertainty of War
Loss of Iraqi oil exports of 2 million barrels per day
Potential for disruptions to Kuwaiti oil production
Political turmoil in Venezuela and civil unrest in
Nigeria
Al Qaeda threats to Saudi oil export facilities
Availability of oil tankers to transit the Persian Gulf
Very low U.S. crude oil and refined product
inventories
Inventories are Low
As of March 14, 2003
Crude Oil Prices WTI– Daily Spot Price
Through March 19, 2003
40
38
dollars per barrel
36
34
32
30
28
26
24
22
Mar
Apr
May
Jun
Jul
WTI -- West Texas Intermediate
Source: Energy Information Administration
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Michigan Population Weighted Heating Degree Days
8000
7500
7,442
7,146
6,875
7000
6,378
6500
6,153
6,840
6,206
6,183
6000
5500
5000
'95-96
'96-97
'97-98
'98-99
'99-00
'00-01
'01-02
Normal
Heating Degree Days -- Lansing
Through March 9, 2003
Through March 2, 2003
Weekly Crude Oil and Home Heating Fuel Prices
1.80
$/gallon
1.60
2001-02 Heating
Season
Heating Oil ($/gal, left scale)
Propane ($/gal, left scale)
40.00
2002-03 Heating
Season
Crude Oil ($/bbl, right scale)
35.00
1.40
30.00
1.20
25.00
1.00
0.80
10
/5
11 /01
/5
12 /01
/5
/0
1/ 1
5/
2/ 02
5/
3/ 02
5/
0
4/ 2
5/
5/ 02
5/
0
6/ 2
5/
7/ 02
5/
8/ 02
5/
0
9/ 2
5
10 /02
/5
11 /02
/5
12 /02
/5
/0
1/ 2
5/
2/ 03
5/
3/ 03
5/
03
0.60
Source: Michigan Public Service Commission and Energy Information Administration
20.00
15.00
$/barrel
2.00
Residential Heating Oil Prices
Weekly Average Prices, $/gallons excluding sales tax
$1.90
National
$1.80
$1.70
Michigan
$1.59 3/17
$1.60
$1.50
Midwest
$1.40
$1.30
$1.20
$1.10
10/7/02
10/28/02
11/18/02
12/9/02
12/30/02
1/20/03
2/10/03
Source: Michigan Public Service Commission and Energy Information Administration
3/3/03
Residential Propane Prices
Weekly Average Prices, $/gallons, excluding sales tax
$1.95
$1.75
Michigan
$1.62 3/17
$1.55
National
$1.35
Midwest
$1.15
$0.95
10/7/2002 10/28/2002 11/18/2002 12/9/2002 12/30/2002 1/20/2003 2/10/2003 3/3/2003
Source: Michigan Public Service Commission and Energy Information Administration
Propane Daily Wholesales Prices
U.S. Mid-continent -- through March 19, 2003
100
cents per gallon
90
80
70
60
50
40
30
Mar
Apr
May
Jun
Jul
Aug
Source: Energy Information Administration
Sep
Oct
Nov
Dec
Jan
Feb Mar
Residential Propane Prices
Heating Seasons 1995 to 2003
$1.80
Michigan
Midwest
U.S.
$1.60
$1.40
$1.20
$1.00
$0.80
$0.60
'95-96
'96-97
'97-98
'98-99
'99-00
'00-01
'01-02
'02-03
Source: Michigan Public Service Commission and Energy Information Administration
Michigan Gasoline Demand





2002 consumption is estimated to be 4.8 billion gallons
Average daily demand is 13 million gallons
Michigan consumption is projected to increase 11.1 million
gallons through the first half of 2003, or 0.5%. Given
higher prices, this growth could be depressed.
Michigan has nearly 8.5 million registered motor vehicles.
Total 2002 expenditures for gasoline were about $6.7
billion. Based on current prices and projected demand,
expenditures through the first half of the year could
increase by $2 million per day.
Michigan Monthly Gasoline Consumption
Usage has a seasonal pattern
500,000
Gallons per month
450,000
400,000
350,000
300,000
250,000
Jan-90
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Michigan Primary Gasoline Inventories
The trend has been to operate with less in storage
250,000
Gallons
200,000
150,000
100,000
50,000
0
Jan-85
Jan-88
Jan-91
Jan-94
Jan-97
Jan-00
U.S. refinery capacity has become
increasingly concentrated
U.S. Refining Capacity
20
300
15
250
10
200
5
150
100
0
1971
1976
1981
Num ber of Refiner ies
1986
1991
Cr ude Oil Distillation Capacity
S ource: E nergy Infromation A dministration, and MP S C S taff estimates
The U.S . P etroleum Industry the P ast as a P rologue 1970-1992, P etroleum S upply A nnual T 41.
1996
Ca pacity
Th ousan ds
Nu mber of Re finer ies
350
Gasoline prices typically follow crude oil prices
Detroit Area
Unleaded Regular Gasoline Retail Prices
$2.30
$2.10
$1.90
Prices through March 17, 2003
Source: AAA Michigan
$1.70
$1.50
$1.30
$1.10
$0.90
$0.70
$0.50
01/05/93
01/05/95
01/05/97
01/05/99
01/05/01
01/05/03
Michigan Unleaded Gasoline Prices
$3.00
$/gallon
$2.50
$2.00
Real Prices (Today’s $)
$1.50
$1.00
Actual Prices (Nominal $)
$0.50
1973
1978
1983
Source: AAA Michigan, U.S. Census Bureau
1988
1993
1998
2003
$1.95
$1.25
California
Hawaii
Nevada
Arizona
Oregon
Washington
New York
Alaska
D.C.
Connecticut
Wisconsin
Idaho
Montana
North Dakota
Michigan
Illinois
Rhode Island
Florida
West Virginia
Nebraska
Massachussetts
Utah
Indiana
Colorado
Maryland
New Mexico
Vermont
Wyoming
Ohio
South Dakota
Maine
Kentucky
Kansas
Pennsylvania
New Hampshire
Iowa
Minnessota
Delaware
Arkansas
North Carolina
Alabama
Tennessee
Mississippi
Louisiana
Texas
Virginia
Missouri
New Jersey
Georgia
South Carolina
Oklahoma
$ per gallon
Unleaded Gasoline Prices as of March 19, 2003
$2.25
$2.15
$2.05
Michigan
$1.85
$1.75
$1.65
$1.55
$1.45
$1.35
$1.35
$1.15
California
Arizona
Alaska
Nevada
Hawaii
Oregon
Washington
D.C.
Wyoming
North Dakota
New Mexico
Kentucky
Idaho
New York
Vermont
Massachussett
Colorado
Connecticut
Montana
Michigan
Indiana
Ohio
Maryland
West Virginia
New Hampshire
Georgia
Utah
Nebraska
Wisconsin
Iowa
South Dakota
New Jersey
Maine
Minnessota
Arkansas
Missouri
Kansas
Illinois
Virginia
Florida
Alabama
Delaware
Mississippi
Louisiana
Rhode Island
Texas
Tennessee
South Carolina
Oklahoma
North Carolina
Pennsylvania
$ per gallon
Unleaded Gasoline Prices as of March 19, 2003
Excluding Federal, State and Local Taxes
$1.70
$1.65
$1.60
$1.55
$1.50
$1.45
$1.40
Michigan
$1.30
$1.25
$1.20
Cost Component Comparison
Statewide Regular Unleaded Gasoline
$2.00
$1.77
Price per Gallon
8.8%
$1.50
$1.39
18.9%
9.3%
$1.00
Distribution &
Marketing
Refining
18.0%
26.2%
Taxes
31.9%
$0.50
Crude Oil
46.1%
40.9%
$0.00
2002
March 17, 2003
Source: AAA Michigan, Energy Information Administration
Cost Components of Gasoline
Statewide Regular Unleaded Gasoline January 2000 to February 2003
Gross Markup
Crude Oil to
Wholesale
$2.00
Gross Retail
Markup
$1.50
$1.00
Crude Oil Costs
$0.50
State and Federal Taxes
n03
Ja
ly
Ju
n02
Ja
ly
Ju
n01
Ja
ly
Ju
n00
$0.00
Ja
Price per Gallon
$2.50
Petroleum Price Impacts in Michigan

Direct Consumer Impacts






Motorists pay higher gasoline bills
Higher heating costs for heating oil and propane
users
Higher business operating costs passed on to
consumers
Durable Goods Manufacturing
Tourism
Agriculture
Petroleum Price Impacts on Michigan Households
Cold weather and higher prices have increased bills
$1,800
Expenditures per Household
$1,600
$1,628
2002
2003
$1,459
$1,331
$1,400
$1,200
$1,011
$1,000
$800
$988
$693
$600
$400
$200
$0
Gasoline
Propane
Heating Oil
Critical Infrastructure Protection
• The MPSC is working with the
private sector to reduce risk and
vulnerabilities at key energy facilities.
• Participating on Michigan Homeland
Security Task Force to assure a
coordinated State Government
response.