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Page added on September 19, 2014
MPG OMG! What’s behind the gasoline demand drop?
Over at ESPN, there’s a podcast called “Numbers Never Lie.”
The name’s something sports types like to throw around when making a point.
Like this: Detroit Tigers slugger Miguel Cabrera is one of only four players with 300 total bases in 11 straight seasons. It would be hard for even a Kansas City Royals fan to punch a hole in that.
But gasoline statistics lack that kind of foundation. One man’s golden ticket is another’s fool’s gold, especially if the guy with the golden ticket knows about the leaky refinery and his golfing buddy doesn’t.
Case in point: In the last two weeks, US driver demand has taken a dramatic, and perhaps sustainable, dip. The US Energy Information Administration’s best take on demand is “implied demand,” reflected by the amount of gasoline that reaches the pump as product supplied in any given week. It’s not really demand as Merriam-Webster sees demand. So that number might be one big fat lie. But it’s the best we’ve got.
In the week ending September 5, implied demand fell 869,000 b/d to 8.611 million b/d for the largest week-over-week drop since two days after 9/11. The following week, the one ending September 12 of this year, demand gained 96,000 b/d but remains short of 9 million b/d, which is the figure my bosses will toss around in conversation when anyone asks them where demand is.
Sounds like a story. But maybe not. “Blip,” the traders said. “Aberration.” “Won’t last.”
Or my favorite: “The kids out aren’t burning Mom and Dad’s gasoline,” a US products trader said. “If one bus holds 30 kids who aren’t running around in 30 cars, who burns more fuel?”
Something else the market said: Check the four-week average. That’s where the truth lies.
EIA data does show that demand actually is a little higher than it was at this time in 2013. But there are still nagging doubts in the market. Are people driving less? Is social media keeping teen drivers at home? Maybe the bus really doesn’t smell all that bad, does it?
One consultant who keeps tabs on the pump says factors such as the rise of personal taxi service Uber, the lack of economic power among twentysomethings and fuel economy that is offsetting gains in vehicle sales all will keep a lid on demand.
MPG, OMG!
“Have we found a bottom in driver demand? At least in the short term, the answer is yes,” said Geoffrey Styles, managing director of GSW Strategy Group LLC in Vienna, Virginia. “But in the long run, there is a lot further to drop. Fuel economy is going to start to bite.”
Last year was a banner year for car sales, Styles said, but those gains have yet to work themselves into the statistics.
On the car lot, Ford and others are fighting the perception that trucks can’t get high MPG, said Edmunds.com auto analyst Jonathan Mandanici. He said Ford’s new F-150 is promoted as a lighter, more efficient truck than last year’s model and is “likely to be a game-changer.” He said customers are developing more confidence in high-MPG models such as hybrids, compacts and subcompacts.
“MPG is certainly a factor in the US drop in demand for fuel, especially since many manufacturers have reported their best monthly sales figures in years as recently as July and August of this year,” he said.
The Ford F-150 is now at 19 MPG, up from 14 for the 2004, and Edmunds says it is the top-selling model of the first eight months of this year. Rounding out the US top 5 are the Toyota Camry (28 MPG), Honda Accord (31 MPG), Chevrolet Silverado 1500 (20 MPG) and Toyota Corolla (35 MPG), Edmunds said.
But all the savings in the world at the Sunoco aren’t going to make a difference if drivers don’t have anything to put the gas into.
“In my generation, it used to be that if you did not have a car, you were nowhere,” Styles said. “That is not so much the case anymore.”
9 Comments on "MPG OMG! What’s behind the gasoline demand drop?"
bobinget on Fri, 19th Sep 2014 7:28 pm
When our daughter announced her new husband to be
could not (or did not) drive, we had to ask her again.
San Francisco, where my son-in-law comes from has the toughest parking laws in California. Enough it seems to turn off all but the richest and most dedicated car lovers.
Sure-nuff city dwellers, more often then not never bother to even learn to drive.
Makati1 on Fri, 19th Sep 2014 7:53 pm
“MPG OMG! What’s behind the gasoline demand drop?”
Answer: Creeping poverty…
dashster on Fri, 19th Sep 2014 11:07 pm
“Answer: Creeping poverty…”
That’s what Stephen Kopits was saying in his Columbia presentation. People weren’t choosing to drive less because they got greener, or because they moved to the city. It was money related.
There also was the issue of young people not getting driver’s licenses or vehicles and he tied that to unemployment or underemployment, not a new desire to walk or take mass transit instead.
GregT on Sat, 20th Sep 2014 1:36 am
The West is doing everything that it can to wreak havoc on the economies of Russia and Iran. Sanctions so far, have proven to be futile. This is a last ditched attempt at maintaining global hegemony for TPTB, at the expense of the American citizenry, and all of the people of Europe. The BRICS are moving away from the USD, and the USDs days are numbered. We have now moved into a new global multipolar world, and the Globalists will not give up their power without a fight. If economic warfare does not work, expect WW3 in the not so distant future.
Makati1 on Sat, 20th Sep 2014 3:03 am
Well said, GregT!
Beery on Sat, 20th Sep 2014 6:23 am
BS article, at least where the author is talking about reduced demand due to fuel efficiency. Jevons Paradox shows that improvements in efficiency always INCREASE demand, because more people can afford to be in the market for fuel.
It’s not a great mystery why demand is falling. Demand always falls when prices rise. All the people who could barely afford a car when fuel was $50/bbl cannot afford one at $100/bbl.
Davy on Sat, 20th Sep 2014 7:29 am
“Creeping poverty” is a poor and simplistic propaganda bark. Intelligent readers know it is the complex dynamics of the compression of price and production issues. I also want to add the move away from the dollar by the Brics has been allot of talk with few results. None of the Bric currencies is adequate standalone reserve currency and a basket Bric currency mix would be a disaster. There is no way to get away from the dollar and Euro as a significant part of the global reserve currency needs. I welcome the diminishment of the dollar and recognize it is part of the natural evolution of the economics of world trade. A diminished dollar will increase resiliency but in any case we have very few years before the significance of globalism is seriously diminished so the dollar and reserve currency issues will be a non-issue. It will be at what level we reboot at as a civilization.
Kenz300 on Sat, 20th Sep 2014 10:38 am
Maybe more people are walking, riding a bicycle or taking mass transit.
Bicycle rental programs are being implemented in many cities and more bicycle and walking paths are being developed that provide safe connections to work, schools, homes and businesses.
The fact that new cars are being produced that get in many cases double the gas mileage of the ones they replace also helps. 40mpg is better than 20 mpg.
Electric, flex-fuel, hybrid, CNG, LNG and hydrogen fueled vehicles are being added to the transportation mix. Ethanol now makes up 10% of most fuel sold. E85 sales are increasing as the lower price of E85 compared to regular gasoline grows.
There is no one reason for the drop in gasoline. There are many reasons for the drop in gasoline demand.
Big Companies, Big Renewable Investments
http://www.renewableenergyworld.com/rea/news/article/2014/08/big-companies-big-renewable-investments
Makati1 on Sat, 20th Sep 2014 6:56 pm
Davy, we will ‘reboot’ at a 3rd world level at best, and never get higher again. No chance of anything better, and a big chance humans will no longer exist to ‘reboot’. Any other scenario is dreaming. How and when are the only questions unanswered, but I believe it is before 2020 and probably 2016.
China is talking about pegging the Yuan to gold. If they can do that, the end of the USD will be swift. The US has no gold to speak of or the audit of Fort Knox would not be a problem.