The link between fuel-efficient cars and downward trends in demand is undeniable, said Ed Weglarz, executive vice president of the Farmington Hills, Mich.-based Associated Food & Petroleum. "Most cars nowadays are getting 25 miles to the gallon. Well, when you replace that 1991 Chevy Caprice that was getting 17 miles to the gallon and doing the same amount of driving, you're going to use less gasoline. So just by the evolution, gasoline sales are going to be down, if the same number of people are driving the same number of miles."
According to the 2009 Energy Information Administration (EIA) energy outlook, sports utility vehicle (SUV) sales had jumped from 5.6% of the mix in 1990 to 27.7% at its peak year in 2007, which was a driver for gasoline demand. That share is expected to decrease to 23.9% by 2015, with a shift toward mid- to large-sized vehicles.
Hybrid and diesel vehicles are currently increasing their market share despite often higher initial purchase prices, as consumers become more aware of their fuel economy benefits, the EIA goes on to say, while manufacturers are selling more "flex-fuel" vehicles in response to incentives built into the current fuel-economy regulations.
Other alternative vehicles include pure electric, plug-in hybrid electric, mild hybrid, natural gas, liquefied petroleum gas and fuel-cell powered vehicles, but these vehicles are not yet widely available to consumers, EIA officials said.
Of course, there is another factor explaining the decline in demand, according to Weglarz. "You've [also] got the unemployment problem, so people aren't going to work and, therefore, they're using less gasoline. And they don't have the money if they're unemployed," he said.
Rayola Dougher, senior economic advisor at the Washington-based American Petroleum Institute (API), said, "Is the economy in the United States and Europe going to pick back up? That will have a terrific impact on the demand that we're going to see, which would then in turn have an impact on prices." She adds that the current forecast for the Organization for Economic Co-operation & Development (OECD) countries means pretty flat growth, but that some growth will be seen in the rest of the world's demand. "So maybe we'll get back to 2007 levels sometime this year, in terms of world demand, but maybe not until 2011."
For more on how refinery losses and shutdowns may affect fuel pricing along the supply chain, look to the April issue of CSP magazine.
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