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Page added on December 22, 2010

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U.S. gasoline demand begins long decline


The world’s biggest gas-guzzling nation has limits after all.

After seven decades of mostly uninterrupted growth, U.S. gasoline demand is at the start of a long-term decline. By 2030, Americans will burn at least 20 percent less gasoline than today, experts say, even as millions of more cars clog the roads.

The country’s thirst for gasoline is shrinking as cars and trucks become more fuel-efficient, the government mandates the use of more ethanol and people drive less.

“A combination of demographic change and policy change means the heady days of gasoline growing in the U.S. are over,” says Daniel Yergin, chairman of IHS Cambridge Energy Research Associates and author of a Pulitzer Prize-winning history of the oil industry.
Recessions’ effects

This isn’t the first time in U.S. history that gasoline demand has fallen, at least temporarily. Drivers typically cut back during recessions, then hit the road again when the economy picks up. Indeed, the Great Recession was the chief reason demand fell sharply in 2008.

But this time looks different. Government and industry officials – including the CEO of Exxon Mobil – say U.S. gasoline demand has peaked for good. It has declined four years in a row and will not reach the 2006 level again, even when the economy fully recovers.

In fact, the ground was shifting before the recession. The 2001 terrorist attacks, the war in Iraq, Hurricane Katrina and pump prices rising to a nationwide average of $3 a gallon for the first time in a generation re-ignited public debates about the political and economic effects of oil imports and climate change. Also, the popularity of SUVs began to wane, and the government started requiring refiners to blend corn-based ethanol into every gallon of gasoline.

Americans are burning an average of 344 million gallons of gasoline per day in 2010, a figure that excludes the ethanol blended into gasoline. That’s 8 percent less than at the 2006 peak, according to government data.
‘A player in exports’

Management at San Antonio-based Valero Energy Corp. agrees that demand for gasoline in the U.S. has peaked and won’t return to its previously high levels, spokesman Bill Day said.

But the independent refiner is bullish on demand for diesel fuel in the United States and on demand for gasoline and diesel abroad.

“We’re positioning ourselves to be a player in exports, particularly in Latin America,” Day said. And Valero will benefit from rising government mandates for ethanol use. It owns 10 ethanol plants.

Also, Valero has prepared for changing U.S. market conditions by shutting down or selling refineries that don’t fit with its overall strategy.
Accelerating trend

The decline in gasoline demand is expected to accelerate for several reasons.

Starting with the 2012 model year, cars will have to hit a higher fuel economy target for the first time since 1990. Each carmaker’s fleet must average 30.1 miles per gallon, up from 27.5. By the 2016 model year, that number must rise to 35.5.

The auto industry is introducing cars that run partially or entirely on electricity, and the federal government is providing billions of dollars in subsidies to increase production and to spur sales.

By 2022, the U.S. fuel mix must include 36 billion gallons of ethanol and other biofuels, up from 14 billion gallons in 2011. Put another way, biofuels will account for roughly one of every four gallons sold at the pump.

Gasoline prices are forecast to stay high as developing economies in Asia and the Middle East use more oil.

There are demographic factors at work, too. Baby boomers will drive less as they age. The surge of women entering the workforce and commuting in recent decades has leveled off. And the era of Americans commuting ever farther distances appears to be over. One measure of this, vehicle miles traveled per licensed driver, began to flatten in the middle of the last decade.


4 Comments on "U.S. gasoline demand begins long decline"

  1. Rick on Wed, 22nd Dec 2010 1:54 am 

    This article assumes a lot. And ethanol is a joke. And where I live, there are stupid SUV’s everywhere. In short, the way I read this article is everything will be okay, Peak Oil won’t be an issue. In other words spin by some oil person. Of course Chron is based in Texas.

  2. James on Wed, 22nd Dec 2010 3:47 am 

    All this is just a mirage. First, the farmers of America won’t be able to grow enough crops to provide raw materials for Ethanol, and for our food supply at the same levels we are used to. We can’t grow crops without incorporating fertilizers and fertilizers are having their problems as well. If farmers try to grow crop after crop for ethanol production on the same ground, it will “burn out” the soil. They will need to provide fertilizers on a continuing basis to grow the crops needed for ethanol. There is an opportunity cost where you either grow crops for food or fuel. You can’t sustainably grow both at the same time, on the same amount of cropland.

  3. DC on Wed, 22nd Dec 2010 1:09 pm 

    The author cannot grasp that ethanol wont ‘reduce’ anything. If anything, if the americans persist in there corn-ethanol fanasties, then whatever decline(may appear) on paper in gas consumption will be more than offset in an increase in the amount of fuel used to farm,process and distribute the crap. I wish these people could grasp the simple concept that corn ethanol simply cannot be considered a ‘fuel’ in any sense of the word. CE is in some resepcts a heavily subsidized energy shell game that will never pay off.

    As for amercan cars getting more efficent, thats a good one, american built trash-bins ‘efficency’ have actually declined on average over the last century. Somehow GM Ford Chyslers will manage to weasle out of actually makeing anything more than token promises or outright frauds, ie fuel-cell vehicles or the so-called ‘volt’. NA caremakers may not know how to make good(effeicnt) vehicles, but they are extremely good at pretending that one day they actually might.

  4. Kenz300 on Fri, 24th Dec 2010 10:54 pm 

    Energy conservation is a necessary element of dealing with limited
    energy, high oil/energy prices, pollution and global warming. Ramping up wind, solar, geothermal and second generation biofuels will lessen the impact. Creating sustainable communities where one can walk or bicycle to work, school or play would reduce the amount of energy spent on transportation.

    Generating clean, sustainable distribute d alternative energy locally would provide local energy and local jobs. Wind, solar, geothermal and second generation biofuels can all be produced locally.

    A California-based company is building a $120 million biofuels plant near Reno Nevada. They expect the plant will create more than 50 full-time and 450 temporary jobs.
    The plant is expected to produce over 10 million gallons of second generation ethanol AND 16 megawatts of electricity annually by processing MUNICIPAL SOLID WASTE.

    This plant will create clean energy and reduce dependence on foreign oil by
    processing HOUSEHOLD GARBAGE.

    Clean, sustainable alternative energy — that is what we need — local energy, local jobs.

    If every garbage dump in the country co-located an ethanol plant we could go a
    long way toward producing local energy and local jobs.

    At the very least we should diversify our energy sources.

    We can produce a portion of the energy we need and at the same time reduce
    what is going into landfills. The trash is already being delivered daily so the input costs to the plant would be low. Sounds like a win win situation

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