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By Lou Gagliardi on Jun 11, 2013 with 2 responses

Slow Economic Growth Puts Gasoline Consumption in a Downward Spin

As we have built more fuel efficient transportation vehicles over the years, we have been able to curtail our consumption of motor gasoline and distillates – diesel. However even with more fuel efficient vehicles, our gasoline consumption as measured by the U.S. Energy Information Administration (EIA) of total product supplied has been fairly stable since the 1980’s as more vehicles have come onto the road to offset greater fuel efficiency. Then in 2008, the Great Recession hit brought on by the financial crisis and the trend accelerated dramatically downward. By 2008 fuel consumption began to slide downward, by 2012 gasoline consumption literally fell off the cliff.

gas demand lags

The primary catalyst for the dramatic decline in motor gasoline demand has been weak economic growth in the U.S. that has been exacerbated by stubbornly high retail fuel prices pegged to relatively high crude prices, despite a deepening global recession.

Not only has gasoline demand been weak since 2009, it has been successfully lower roughly each year to year the date in 2013. Within the last month gasoline retail sales have moved upward, whether we see this 2013 trend pass above 2012 remains to be seen. For now, clearly demand in 2013 remains below previous years.

lower gas demand accelerates

Retail fuel consumption may or may not recover to post 2008 levels, but what is clear is that we are living in a world of multi headwinds for energy consumption, relatively high crude prices, and slow global economic growth.

  1. By Zaoldyeck on June 12, 2013 at 1:35 am

    I don’t know if I want low demand to make prices drop or not. Really I’d just love to get off oil, the US hasn’t built a new nuclear reactor in decades, and the last one approved was still a Gen III light water PWR.

    Nuclear power is the only thing which can produces orders of magnitude more energy than current world demands, and fusion, if accomplished, is the closest thing to free energy possible. (Unless you can violate matter/antimatter asymmetry but as far as physics is aware, you can’t.)

    A lot of world problems start to vanish when we no longer need to care about energy.

    Sticking to oil is sticking to industrial revolution technology. We can do better.

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  2. By ben on June 14, 2013 at 11:30 am

    Thanks for this revealing snapshot, Lou. You’ve done a fine job in highlighting the points that have guided my own understanding for several years involving concerns about the impact of demand destruction. Slower (than historic average) rates of growth struck us as inevitable in light of what appeared to be the case for a decade-long deleveraging. One has to openly wonder if the impetus for a new monetary order isn’t building given the back-draft in the EU and, increasingly, emerging concerns about the sustainability of Asian economic performance.

    The discouraging part here is the erosion of enthusiasm for alternative energy sources (both at the consumer and investor levels) when demand drops and prices (albeit lagging) move correspondingly. I’m not suggesting any major break in the price of liquid fuels since the cost of these products will remain high and the tempo of new discovery and practical output remain fairly modest notwithstanding some marked improvements in

    NA production of recent years. The case can be made, however, that some relief has been visited upon us and none too soon given the precarious state of our national and global economy. As they say on the farm, we would do well to make hay while the sun shines. I’m afraid there is a school of thought out here that believes when prices are falling, and news remains upbeat about advancing domestic production, we tend to eye the hammock for an afternoon siesta. I dare say that’s hardly a recipe for restoring economic growth at home or abroad.
    Thanks again for the typically solid analysis.
    Ben

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