Domestic use of distillate fuels fell in 2012 despite steady demand from on-highway transportation, by far the largest user. The decline in domestic consumption of 156,000 barrels per day (bbl/d), or 4.0 percent, compared with 2011 broke a trend that saw distillate use rise by 4.7 percent in 2010 and 2.6 percent in 2011 as the economy recovered (Figure 1).

Lower distillate consumption reflects a combination of factors, including lower demand for heating oil and a decrease in rail traffic. The drop in domestic consumption during 2012 was offset by increased demand for U.S. distillate exports, which rose 154,000 bbl/d (18 percent) compared to 2011.

Distillate fuel consumption lower in 2012

The U.S. Energy Information Administration (EIA) estimates that on-highway transportation accounts for about 60 percent of the distillate fuel consumed in the United States. Based on excise tax receipt data from the Federal Highway Administration (FHWA), diesel fuel consumption for on-highway transportation was virtually unchanged in 2012 compared with 2011. The FHWA reported that total sales of diesel and alternative fuels averaged 2.4 million bbl/d from January through October, a 0.2 percent increase over the same period in 2011.

Consumption of distillate fuels with high sulfur content [>500 parts per million (ppm)], used almost exclusively for heating oil, was down 98,000 bbl/d (25 percent) nationwide in 2012 according to preliminary data. Petroleum Administration for Defense District 1 (PADD 1), which includes the Northeast, the nation's largest heating oil market, had the largest regional decline in consumption of high-sulfur fuels (more than 60,000 bbl/d). The decrease in distillate consumption for heating use in PADD 1 was driven by mild weather during first-quarter 2012. The New England and Middle Atlantic census divisions, which make up the Northeast, saw 21 percent fewer heating degree days during first-quarter 2012 compared to the same quarter in 2011. Moreover, distillate consumption for home heating declined over the last decade as consumers switched to less-costly heating options, where available. Consumption of high-sulfur fuels declined in other regions, as well. PADD 5 (West Coast) consumption was down 15,500 bbl/d from 2011, PADD 3 (Gulf Coast) dropped 11,000 bbl/d, and PADD 2 (Midwest) fell 10,000 bbl/d (Figure 2).

Distillate fuel consumption lower in 2012

A decline in railroad consumption of diesel also contributed to lower overall distillate demand in 2012. According to the Association of American Railroads, the railroad sector saw a 3.1-percent decrease in carloads during 2012, due mostly to lower coal traffic. The rail sector accounted for about 5 percent of total distillate consumption in 2011, and a 3.1-percent drop could equate to more than a 6,000-bbl/d decrease.

Consumption of distillate fuel by the electric power industry, which accounted for only about 1 percent of total distillate demand in 2011, fell by 19 percent in 2012 as natural gas-fired generation continued to surge. Although the electric power sector is not a large consumer of petroleum liquids, this 19-percent reduction represents over 6,000 bbl/d of reduced demand for distillate.

The remaining drop in distillate consumption in 2012 of about 45,000 bbl/d was likely due to a wide-ranging combination of factors, including drought, Hurricane Sandy, and increased industrial efficiency across sectors.