JAN
7

Sluggish Gasoline Demand? Don’t Believe the Hype

 
It’s not unusual for the media to miss the mark on a variety of energy security issues; look no further than the relentless references to “energy independence” for proof. But while the headlines may frequently miss the nuances of energy issues, it’s not often that they state the altogether polar opposite of the truth.

Enter coverage of gasoline demand in the current era of low oil prices. The most recent Weekly Petroleum Status Report from EIA pegs U.S. gasoline demand at 9.6 million barrels per day for the last week of December—0.8 mbd over last year’s December demand. In fact, it’s a level that matches peak summer demand from banner years in the mid-2000s, when U.S. gasoline demand reached all-time highs. Skeptical observers will note that the Weekly Petroleum Status Report, while a legitimate data source, is compiled under considerable time constraints, and can be subject to revision. However, EIA’s weekly petroleum dataset still reflects major trends, and it’s safe to say that travel demand is on the rebound. The most recent data from a more finalized set, Total Gasoline Retail Sales by Refiners, shows that the demand increase from September through October of 2014 was the largest month-over-month increase since July 1998, coinciding with when gasoline prices began their precipitous nosedive in September. We’ll be keeping eyes on the demand data for November and December, to see if the numbers in the Weekly Petroleum Status Report are corroborated.

Unfortunately, misleading headlines such as, “Turns out, prices don't really affect gasoline demand,” "Lower price at the pump doesn't mean much more driving, report says,” and “U.S. gasoline output is soaring, but demand is still low” are keeping the general public unaware of the demand rebound. Given other factors, such as surging sales of SUVs, pickup trucks, and other heavy duty vehicles, we could easily see 2015 gasoline levels return to record levels from the mid-2000s, reversing the current narrative that demand will stay stagnant no matter how low prices fall.