The U.S. manufacturing sector has barely grown since the outbreak, explaining why the diesel consumption has remained anemic. It has also not recovered in line with the expectations made at the beginning of the year.

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

The output was virtually unchanged from a year earlier and there has been no net growth of any significance since 2018.

The U.S. manufacturing sector has recovered from the disruptions caused by the trade war in China in 2018, and the pandemic that hit the United States in 2020, but the output is not higher than it was before these disruptions.

The Federal Reserve measures the production in volume, but the same growth is evident in the value-added measure prepared by the U.S. Bureau of Economic Analysis.

The adjusted manufacturing value added, adjusted for inflation, was $2.29 trillion by 2023, up from $2.21 billion in 2018. This is an increase of only $77 billion in five years.

The real manufacturing value added has grown at a rate of 0.7% per annum since 2018. This is well below the 2.1% growth in the economy and 2.3% growth in private sector.

The value added by the manufacturing sector in the economy as a whole fell from 11.0% to 10.2% between 2018 and 2023.

Chartbook of U.S. manufacturing output

Transporters of goods by rail and road, as well as industrial consumers, consume more than three quarters of the diesel and other distillate oil.

It is not surprising that the volume of distillate oil sold on the domestic market has barely increased since 2018.

In 2023, the total volume of distillates supplied to U.S. consumers from petroleum and renewable sources increased by only 42,000 barrels per daily (b/d), or 1%.

The amount of distillates produced from petroleum sources has actually decreased by 213,000 b/d (5%), as biodiesel fuel and renewable diesel fuel have increased.

The gradual switchover of heating systems in residential and commercial buildings from heating oil to gas is also a factor that impacts distillate consumption.

The exceptionally mild winter of 2023/24 also took a bite out of the distillate consumption in the past 12 months.

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

The U.S. manufacturing sector is not growing quickly enough to compensate for the reduction in petroleum demand due to biofuels, efficiency improvements and other factors.

According to the U.S. Energy Information Administration, there will be no significant growth in distillate demand in 2024 and 2025 (Short-term Energy Outlook", EIA June 11).

Torpor in the U.S. Manufacturing Sector is one factor that has caused global oil consumption to fall short of predictions made at the beginning of the year, and led to a drop in the price of crude.

Related columns

U.S. refinery margins fall as fuel stock levels rise (June 13th, 2024)

U.S. Manufacturers in Stopping Recovery but Diesel Use Tepid (7 June 2024)

- Renewable Fuels Cut U.S. Diesel Consumption (May 10, 2024)

U.S. Manufacturers struggle to grow without interest rate reductions (March 5, 2020)

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