Expert Insight: The 2014 Gasoline Demand Debate

The truth behind the ongoing decrease in miles driven

Tom Kloza, Global head of energy analysis, OPIS

Tom Kloza

Tom Kloza

WALL, N.J. -- U.S. gasoline demand clearly closed 2013 with a bang. Final numbers for November and December have yet to go into the official Energy Information Administration archives, but it was an easy task for those months to post year-over-year demand gains. I estimate that when the dust clears, daily 2013 motor fuel demand will be about 60,000 barrels per day to 70,000 barrels per day above the 2012 level.

Don’t be disappointed if that “lift” didn’t show up in fuel sales at the convenience stores you operate or supply. And don’t be shocked if the trend toward year-on-year increases is rudely interrupted in the first part of 2014. Gasoline demand has been extraordinarily “lumpy” in the 21st century. It peaked at 9.64-million barrels per day in July 2007, but as recently as January 2013, demand was measured at a lowly 8.218-million barrels.

Anecdotal evidence, as well as station surveys conducted by OPIS, suggests that there has been considerable regional variation in demand patterns. Soft East Coast demand was clearly a highlight of the first half of 2013, but consumption recovered in the last 100 days of the year. The Great Plains and Great Lakes’ markets were helped by a strong farming sector, as well as jobs’ growth in what used to be known as the Rust Belt. Texas, North Dakota and the Rockies saw brisk second half 2013 demand thanks in great part to the oil-production boom.

A common claim from financial evangelists holds that lower fuel prices were a major factor in lifting U.S. demand and strengthening middle-class incomes. Those claims appear misguided. Various NACS’ surveys this past autumn confirm that many Americans have an embedded fear that leads them to conclude that much higher gas prices are never more than a few months away.

This all foreshadows one of the more predictable trends of the 21st century: Gasoline demand always drops from December through January, and the average drop in 15 years has been 470,000 barrels per day or nearly 140-million gallons per week. A combination of winter weather, light travel schedules and the arrival of bills from holiday shopping all contribute to more “cocooning” among those of driving age.

So when you hear pundits on business news shows trumpet the return of discretional driving and recreational travel, don’t take those declarations as gospel. Refiners and multistate marketers, for example, don’t share the same enthusiasm that gets spouted on Bloomberg, CNBC or Fox Business. Their expectations for 2014 gasoline demand are more sanguine. Average mile-per-gallon statistics for light vehicles in 2014 should safely surpass 25 mpg by spring, and the most mobile segment of the population (those between the ages of 35 and 54) is shrinking. As a result, challenges to secular growth in the gasoline business remain formidable.

By Tom Kloza, Global head of energy analysis, OPIS
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