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Demand for Gasoline, Jet Fuel, and Diesel: Checking on the Recovery

February 13, 2021

Demand for Gasoline, Jet Fuel, and Diesel: Checking on the Recovery

Watching for the EV drag on gasoline demand requires a lot of patience.

Gasoline consumption in the US during the four-week period through February 5 was down by 10.1% from a year ago to 7.89 million barrels per day (mb/d), according to EIA data. Gasoline consumption has been down in the range between 9% and 13% since mid-July, following the initial bounce-back from the collapse in March and April:

That Pandemic level of gasoline consumption below 8 mb/d was something that last occurred during the 1990s.

The effects of the pandemic – massive unemployment and working from home, partially balanced by driving instead of taking mass-transit and flying – are short-term factors that have hit gasoline demand, though they too may entail long-term shifts.

But there are also long-term structural demand issues: Peak consumption just before the Pandemic was just barely above the peak before the Financial Crisis 12 years earlier, with a big trough in between:

The EIA tracks consumption of fuel in terms of product supplied by refineries, blenders, etc., and not by retail sales at gas stations.

The structural demand issues become clearer when gasoline consumption is seen in light of population growth. On a per-capita basis, gasoline consumption peaked in 2004 at 477 gallons per person during the year, using Census Bureau population data. This includes gasoline consumption by commercial vehicles, such as delivery fleets, and by taxi and rideshare operations. By 2019, it had dropped by 8.8% to 435 gallons per person. Then in 2020, it plunged by another 13% due to the effects of the Pandemic, to 378 gallons per person, down 21% from the peak:

Watching for the EV drag on gasoline demand. Not yet visible.

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wolf richter, wolfstreet, gasoline demand, jet fuel, diesel

Update on the WTF Collapse of Gasoline & Jet Fuel Consumption: The Holiday Period

January 9, 2021

Update on the WTF Collapse of Gasoline & Jet Fuel Consumption: The Holiday Period

Long-term structural issues have long dogged these fuels. Then came the Pandemic.

During the holiday shopping and travel period in December and early January, ten months into the Pandemic, gasoline consumption in the US was down about 12% from a year ago, jet fuel consumption was down 38% from a year ago, but distillate consumption – diesel, heating oil, fuel oil – was about flat with a year ago. Consumption of all three combined, under the impact of long-term structural issues and then the Pandemic, were down to levels first seen in the mid-1990s.

As of the latest four-week period through January 1, gasoline consumption fell to 7.89 million barrels per day (mb/d), according to EIA data. This was below where it had been over the same period at the end of 1994 (8.04 mb/d). The chart also shows the long-term structural demand issues, where in the 12 years before the Pandemic, gasoline consumption, after a big drop during the Great Recession and then a recovery, had gone nowhere. This dynamic then got whacked by the changes in driving patterns during the Pandemic:

The EIA tracks consumption of fuel in terms of product supplied by refineries, blenders, etc., and not by retail sales at gas stations.

In March, demand for gasoline had collapsed as millions of people lost their jobs, and therefore didn’t commute, and as others switched to work-from-home and therefore didn’t commute either. In the four-week period ended April 24, average gasoline consumption plunged by 44% year-over-year, to 5.3 million mb/d, by far the lowest in the EIA’s data going back to 1991.

Consumption in the latest four-week period through January 1 was still down 12% from a year ago. Since July, consumption has been down between 8% and 13% year-over-year:

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What Oil Companies Face: The WTF-Collapse of Consumption of Gasoline & Jet Fuel from Long-Term Weakness

November 2, 2020

What Oil Companies Face: The WTF-Collapse of Consumption of Gasoline & Jet Fuel from Long-Term Weakness

Transportation fuel demand rose to where it had been in … 1997.

While the overall S&P 500 Index is down 2.7% in October, about flat for the three-month period, and up 2.8% for the year, the S&P 500 Energy Index is down 4.4% for the month, down 19% for the three-month period, and down 50% year-to-date.

On Friday, Exxon Mobil reported a 29% plunge in revenue in the third quarter, and a loss of $680 million – its third loss in a row, the three of them totaling $2.34 billion. And it warned of possible “significant impairment” charges on “assets with carrying values of approximately $25 billion to $30 billion,” mostly related to its North American shale gas operations. The day before, it had announced job cuts of 14,000 employees and contractors globally, including about 1,900 folks at its Houston headquarters.

Chevron [CVX], which completed the acquisition of Noble Energy in early October, announced this week that it would lay off about one quarter of Noble’s employees. Those layoffs are in addition to the cuts of 10%-15% it’s planning for its own workforce. The cuts at Noble amount to nearly 600 people, and the cuts at Chevron amount to 4,500 to 6,750 folks.

Exxon shares [XOM] have plunged 53% year-to-date to $32.62 on Friday, and thereby edged closer to their March 23 decade-low of $31.45. In July 2014, at the cusp of the Oil Bust, XOM reached a high of $135, having since then plunged by 75%.  Exxon’s dividend yield is now over 10%, but everyone knows that, like other oil companies, Exxon could reduce or eliminate its dividend if push comes to shove.

Bankruptcies by US shale oil and gas companies with less heft and diversification than Exxon and Chevron have turned into a flood. The debts listed in the bankruptcy filings over the first nine months of 2020 reached $89 billion and surpassed year-total filings in the prior peak oil-bust year 2016.

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Update on the WTF Collapse of Demand for Gasoline, Jet Fuel, and Diesel

June 21, 2020

Update on the WTF Collapse of Demand for Gasoline, Jet Fuel, and Diesel

No “V-shaped recovery back to normal.”

Demand for gasoline collapsed in a stunning and historic manner, starting in mid-March when the measures to slow down the spread of the pandemic took effect, when working from home became the new thing, and when millions of people lost their jobs on a weekly basis and stopped driving to work. Gasoline consumption, after bottoming out in the week ended April 3 with a year-over-year plunge of -48%, to 6.7 million barrels per day, the lowest in the EIA’s data going back to 1991, the great recovery began – and fizzled.

Gasoline consumption in the week ended June 12, at 7.87 million barrels per day, was still down 20.7% year-over-year, according to data reported by the EIA today. It has been about the same 20% year-over-year decline four weeks in a row:

The EIA measures weekly consumption in terms of product supplied, such as by refineries and blenders, and not by retail sales at gas stations.

The level of gasoline consumption of 7.87 million barrels per day is still below any pre-pandemic consumption levels since the week in September 2001 after the 9/11 attacks. The WTF moment came in late March and April, when gasoline consumption collapsed. Even now, gasoline consumption remains below the low points during the Great Recession. And this is the beginning of driving season!

Gasoline hasn’t been exactly a booming business since around 2005. The decline in consumption during the Great Recession was followed by a recovery and finally new records starting in 2016. In other words, no growth for a decade.

Jet fuel.

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Biofuels: Can They Save the Airlines from the Seneca Collapse?

October 31, 2017

Biofuels: Can They Save the Airlines from the Seneca Collapse?

Painting planes green is much easier than making them run on biofuels.

“Can the airlines be run on biofuels?” As it often happens, this simple question doesn’t have a simple answer. First of all, it is a question that makes sense only in terms of a “sustainable” plane, that is one that doesn’t run on fossil fuels. That’s a major technological problem. Whereas cars can be made to run on battery-powered electric motors, the power/weight ratio of the combination is simply unacceptable for a passenger plane that could provide a performance comparable to that of current jet planes. Hydrogen planes have been proposed, but they are a nightmare for several reasons and it is unlikely that they could become practical in the short and medium term future.

That would leave only biofuels as a “sustainable” fuel that could power the current fleet of jet planes. Indeed, a small number of tests have been carried out showing that it is possible to fly planes using biofuels. But can it be done on the large scale needed to get rid of fossil fuels?

The first problem is whether biofuels are truly carbon-free. Most likely, the current fuels made from crops are not; in the sense that they involve extensive use of fossil fuels for their manufacturing. In many cases, however, even the current generation (“1st generation”) of biofuels can provide a significant saving in the use of fossil fuels for the same amount of energy produced. This is the case, in particular, for ethanol produced from sugarcane in Brazil. But there is a more fundamental question is: what would be the consequences of ramping up biofuel production to the levels needed to power the current airline fleet?
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