Change in gasoline consumption habits bigger story than oil prices

In today’s environment, where headlines scream “Oil at historic highs” or “OPEC to leave production unchanged,” we continue to believe that rising gasoline inventories should actually be the big story of the day.

Over the past six weeks the nation’s gasoline consumption has decreased an average of 1.1 percent from last year’s levels. The Wall Street Journal reports this is the most sustained demand drop seen in 16 years. We’ve noted weak demand figures from the United States numerous times and generally speaking, we feel this is a trend that will continue for sometime.


A weaker U.S. economy is certainly a portion of the weak usage figures. The EIA estimates personal income declining 1 percent results in gasoline demand being reduced 0.5 percent. In addition to the economy, however, we would suggest demand is shifting as consumers change their usage patterns and alter their lifestyle in response to years of rising prices.

The Congressional Budget Office estimates gasoline prices increasing 10 percent may result in consumption falling 0.6 percent in the near-term. However, if sustained for many years, the demand cut could be closer to 4 percent. Anecdotal data has shown us that consumer behavior is gradually changing. In January, only small cars and crossover SUVs showed rising sales. Meanwhile, minivan and large SUV sales continue to falter. In 2006 sales of large cars fell 2.6 percent. In 2007 they were off 10.5 percent, and versus last year, Autodata Corporation sees January 2008 large car sales down 26.5 percent.

For crude producers, the sky is not falling and the “ride” is not over, but current gasoline inventories are at their highest level since 1994. As noted before, we remain unsure how long (or if) crude oil can remain supported without the products, gasoline in particular, pitching in.

Midland Reporter-Telegram