Gasoline Demand Has Recovered

It’s been taking place slowly, week after week, but low gas prices have brought gasoline demand back up. There has been anecdotal evidence that suggested demand might be heading higher, such as recovering sales of gas guzzling cars. But for watchers of This Week in Petroleum, the data confirm the anecdotes: Gasoline demand has recovered to the point that it is now higher in the U.S. than it was a year ago. This week’s Summary of Weekly Petroleum Data (off of which This Week in Petroleum is based) shows that the 4-week rolling average has for the first time in recent memory increased above (albeit slightly) the level of a year ago.

Another factor to keep an eye on as demand recovers is that refinery utilization is still quite low relative to what’s normal for this time of year. Percent utilization relative to the past 3 years is 3-5% lower for comparable weeks. This is starting to impact gasoline inventories. A typical January will see a healthy build of gasoline across the month, as refiners build stocks ahead of spring turarounds. This year, however, gasoline inventories have been flat across January, and this week in fact saw a drop of 2.6 million barrels. Inventories are still in decent shape, but they bear watching as we move toward spring.

Gasoline imports are also down marginally relative to the past two years, primarily a result of low gas prices. But the present trends of increasing demand, falling inventories, and low refinery utilization, suggest that prices will continue heading north.

20 thoughts on “Gasoline Demand Has Recovered”

  1. Man, oh man. We buy gasoline like sailors drinking on leave.
    $1 gasoline coming again?
    Oil tanking hard again today…we are getting closer to the 18th, the last day of monthly trading on the NYMEX. If not manipulated, oil might go below $30. There is more oil than buyers right now. Now about $35.
    Please Obama-san, tax gasoline.

  2. BTW, IEA release new, and again lower, estimates for global oil consumption today.

    “Forecast global oil demand is revised down by 570 kb/d to 84.7 mb/d in 2009 (-1.1% or -1.0 mb/d year-on-year) after the IMF again slashed its GDP growth prognosis to 0.5%. Our 2008 estimate remains largely unchanged at 85.7 mb/d (-0.4% or -0.4 mb/d versus 2007). Two consecutive years of demand decline have not occurred since 1982/83.

    So! That means 2007 was the year of Peak Demand, followed by 0.4 percent decline in 2008, and an estimated 1.1 percent decline coming in 2009. However, every few weeks, the IEA seems to further adjust these numbers downwards.

    I don’t know if IEA is counting biofuels, or GTLs, or CTLs.

    If the USA would tax gasoline, one could envision 2007 as an all-time peak in crude oil demand, though overall liquid fuel demand might recover in years ahead.

    Countries such as Indonesia, Thailand, and Sweden are taking themselves off the world fuel grid.

    Maybe China too–keeping watching China CTL plants, and PHEVs. We could discover a China that imports less, not more, oil every year.

  3. If we are using as much gasoline as last year and refinery utilization is down …. what does that mean? We are burning gasoline from inventory? We are importing more gasoline?

  4. Robert – maybe I can answer. Imports. Refineries can be configured to make between 40% and 60% diesel. US refiners are set up to maximize gasoline. Just about every other country tries to maximize diesel. Europe makes too much gasoline, so the US has become the dumping ground for the excess. This is helping to keep a lid on prices.

  5. I suspect gas demand is up because the recession is over. I know that sounds pretty crazy,but plenty of leading indicators are signalling recovery. It took a year for the recession to be officially proclaimed,and it’ll probably take as long for its end to be acknowledged.

  6. I suspect gas demand is up because the recession is over. I know that sounds pretty crazy,but plenty of leading indicators are signalling recovery.
    Recession is over?!?

    Do tell what the plenty of leading indicators are.

    From where I sit, I see people still losing their jobs (or wondering if they are next in line). Hard to imagine that there is a large number of people out there beginning to spend (other than the officitutes in Washington).

  7. Here’s the WSJ’s take: U.S. crude oil inventories jumped 4.7 million barrels last week, far more than analysts’ estimates of a 2.7 million barrel increase, and further evidence that the recession is choking the economy’s demand for oil. That helped reverse a timid early-morning crude oil rally and sent crude futures back toward $37.50 a barrel.

    And further on: U.S. gasoline stocks shrank by 2.6 million barrels, the biggest drawdown since last September. Normally, that would be a sign of renewed demand for transportation fuel, but reading the gasoline tea leaves is tricky these days. Thanks to razor-thin profit margins, refiners are standing on the hose, operating at low capacity levels and producing less gasoline than they would normally.

  8. “Do tell what the plenty of leading indicators are.”

    The BDI(Baltic Dry Index) is up 175% from its November low Optimist. More shipping means more trade,which means more jobs….eventually.

    The VIX(Volatility Index)hit 90 in October. It’s less than half that today. The VIX measures investor fear.

    One month T-Bills were yeilding 0% in November. The TED spread was almost 4% at the same time. T-bills are back above .25% and the TED spread is back to 1%. Right about where they should be.

    Commodity prices are starting to move up. Iron ore is up 30% from its October low. Oil is still weak,but it’s at insane price levels for a worldwide recession anyway. The Asian Crisis saw oil hit $10 a barrel.

    Jobs are a lagging indicator. We could be years into a recovery before seeing job growth.

  9. Retail sales were up 1% in Jan. First gain in 6 months. Jobless claims dropped by 8000 last week. I’m not suggested the economy is booming. But,if it stopped contracting,the recession is over.

  10. Actually, now that I thought it over a bit, the fact that gasoline demand is just about even with last year, despite much lower priuces, is a “good” sign.
    Even cutting gasoline prices in half does not stimulate demand. Remember, last year was a down year. We are still below the level of two years ago.
    Meanwhile, mainland China reported imports in Jan. 2009 off by more than 40 percent, and exports off by 20 percent.
    Maury-I hope you are right. But trade figs, output figs show terrible trends. I fear economic contraction is getting worse, not better.
    Crude oil trading below $35 today, and I suspect will trade down until the 18th. NYMEX monthly contracts close on that date, and there is way too much oil for sale, with no buyers. I think unless some huge traders step in to stabilize price, we may see oil in $20s in next week. En route to $10.

  11. Mr. R Squared: Over at Greencarcongress, they posted a study by Sandia Labs to the effect we could get a third of our liquid fuel from ethanol, no problemo.

    See this:

    Is Sandia Labs a credible outfit? They seem to be. The study makes it seem like boosting ethanol production is a walk in the park.

    “Your” prediction of $30? What? When? Who? Where? How?
    Anyway, I still think $10 is in the cards. Time will tell.

  12. I wouldn’t mind 99 cent oil. Oil’s down 15% since I bought BP and Shell,but they’re both up. Heck,they were both up yesterday and again today. I wouldn’t be stupid enough to buy USO. Contracts almost always decline as they come forward.

  13. The spot contract is down $1.50 @ 34.48 per barrel,while next months contract is down .08 @ $42.39 per barrel. The 42.39 price rolls forward on the 18th. That’s why I think oil indexes are the world’s lousiest investment.

  14. Sandia – credible, sort of.
    They say:

    “Sandia’s ’90 Billion Gallon Biofuel Deployment Study’ concludes that 90 billion gallons per year of biomass-derived ethanol can be produced and distributed with enduring government commitment and continued technological progress.”

    And a pig can achieve orbital velocity if you put enough explosive power behind it.

    Based on the 4-page executive summary I came to the conclusion that Sandia is saying we could produce enough biomass to make 90 billion gallons per year. They just assume somebody invents a way to convert cellulose into ethanol on a large scale. Big assumption.

  15. King-

    My impression is possibly we can convert biomass to ethanol on a grand scale–the problem is getting the biomass to the factory. You gotta collect all this switchgrass, put it onj trucks, drive to the factory etc. They better use ethanol trucks….

  16. “They better use ethanol trucks…”

    Actually, that’s just another example of why that sort of thing makes more (not necessarily enough) sense with an integrated approach, e.g. doing the fermenting and distilling etc. as near the point of production as possible and running equipment (like trucks) off gasifiers burning crop waste so as not to eat into the final product. There would be more to it than just that, of course, but it illustrates the point.

  17. Benny – maybe we should start calling you “Dr. Doom”. Here is an economist that agrees with you: Economists Paint a Gloomy Picture

    Gathering that much biomass is certainly a problem. It makes more sense to convert locally and transport the alcohol product. That is the easy part. My point is that Sandia just assumes somebody is going to invent a process for converting cellulose to ethanol. So far nobody has.

  18. King and Benny,
    You raise valid issues, but not insurmountable. Here is one way I could see this play out: Gasification is localized, on a moderate scale, which would minimize the distance you have to transport the bulky biomass. Once you have gas, you can either pipe that to an existing refinery, or produce the liquid fuel right there local.

    Both gasification and Fischer-Tropsch can now be done on in a modular fashion, i.e. scaling down is not the killer it once was. Velosys is one company that produces the modular equipment, and they claim a long list of benefits for going modular. King, you’d have a feel for the validity of that.

    And lose the fascination with ethanol already. As Range Fuels pointed out, you can make both ethanol and butanol from syngas. Now if you take away the corrupting influence of Washington, DC, which one would a fuel producer favor?

Comments are closed.