A New Gasoline Consumption Peak?

Analyst Kemp points to signs that 2016 will be a year for the record books

LONDON -- Gasoline consumption will likely hit a record in 2016, thanks to what is promising to be the biggest summer driving season in the United States.

fuel pump nozzles

That’s according to John Kemp, London-based senior market analyst for Reuters. In a recent column, the analyst pointed to a holding trend in consumption figures reported by the government.

In 2015, motorists in the United States burned through 9.16 million barrels per day (bpd) of gasoline, which is just 125,000 bpd shy of 2007’s record 9.29 million bpd. The U.S. Energy Information Administration (EIA) is currently forecasting that 2016 consumption will stay just below the 2007 high. However, Kemp pointed out that the agency has been consistently revising its consumption projections upward over the past few months, as demand has proven unexpectedly strong.

For example, in its December 2015 Short-Term Energy Outlook (STEO), the EIA projected a 10,000-bpd increase in gasoline consumption for 2016. Then in the January STEO, it raised this to a 70,000-bpd increase. By the March STEO, the EIA bumped up its projected increase in consumption to 90,000 bpd.

By the four weeks ending March 11, implied gasoline consumption—or what the EIA refers to as “product supplied”—rose to nearly 9.4 million bpd, up 560,000 bpd vs. this same time a year ago. It was more than 200,000 bpd higher than the earlier record for this time of year, set in 2007. And it was 400,000 bpd higher than the 10-year average, Kemp said.

While the EIA’s weekly consumption figures are estimates, subject to error and can be revised, they often follow monthly estimates, particularly when averaged over a four-week time frame, Kemp said. Seasonal dynamics and weather can also impact the numbers; for example, floods in the Midwest and a January snowstorm on the East Coast impacted gasoline-consumption estimates for that time period. And some analysts have posited that refiners’ move to purge winter-blend gasoline to make room for summer blends could also have inflated implied consumption figures.

“But the shift from winter-grade to summer-grade gasoline occurs at the same time every year so it is not clear how it could account for unusual implied consumption in 2016,” Kemp said. “Despite some volatility, the weekly estimates have told a consistent story of strong year-on-year growth in gasoline consumption in recent weeks.”

Meanwhile, refineries have processed record amounts of oil into gasoline for this time of the year, for nearly each week of 2016. Despite this, stockpiles of gasoline have hovered around typical levels, Kemp said, or an equivalent of 26.6 days of consumption, compared to 26.7 days this same time in 2015.

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