• 3 hours French Strike Disrupts Exxon And Total’s Oil Product Shipments
  • 5 hours Kurdistan’s Oil Exports Still Below Pre-Conflict Levels
  • 7 hours Oil Production Cuts Taking A Toll On Russia’s Economy
  • 9 hours Aramco In Talks With Chinese Petrochemical Producers
  • 10 hours Federal Judge Grants Go-Ahead On Keystone XL Lawsuit
  • 12 hours Maduro Names Chavez’ Cousin As Citgo Boss
  • 18 hours Bidding Action Heats Up In UK’s Continental Shelf
  • 23 hours Keystone Pipeline Restart Still Unknown
  • 1 day UK Offers North Sea Oil Producers Tax Relief To Boost Investment
  • 1 day Iraq Wants To Build Gas Pipeline To Kuwait In Blow To Shell
  • 1 day Trader Trafigura Raises Share Of Oil Purchases From State Firms
  • 1 day German Energy Group Uniper Rejects $9B Finnish Takeover Bid
  • 1 day Total Could Lose Big If It Pulls Out Of South Pars Deal
  • 2 days Dakota Watchdog Warns It Could Revoke Keystone XL Approval
  • 2 days Oil Prices Rise After API Reports Major Crude Draw
  • 2 days Citgo President And 5 VPs Arrested On Embezzlement Charges
  • 2 days Gazprom Speaks Out Against OPEC Production Cut Extension
  • 2 days Statoil Looks To Lighter Oil To Boost Profitability
  • 2 days Oil Billionaire Becomes Wind Energy’s Top Influencer
  • 2 days Transneft Warns Urals Oil Quality Reaching Critical Levels
  • 2 days Whitefish Energy Suspends Work In Puerto Rico
  • 2 days U.S. Authorities Arrest Two On Major Energy Corruption Scheme
  • 3 days Thanksgiving Gas Prices At 3-Year High
  • 3 days Iraq’s Giant Majnoon Oilfield Attracts Attention Of Supermajors
  • 3 days South Iraq Oil Exports Close To Record High To Offset Kirkuk Drop
  • 3 days Iraqi Forces Find Mass Graves In Oil Wells Near Kirkuk
  • 3 days Chevron Joint Venture Signs $1.7B Oil, Gas Deal In Nigeria
  • 3 days Iraq Steps In To Offset Falling Venezuela Oil Production
  • 4 days ConocoPhillips Sets Price Ceiling For New Projects
  • 6 days Shell Oil Trading Head Steps Down After 29 Years
  • 6 days Higher Oil Prices Reduce North American Oil Bankruptcies
  • 6 days Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 6 days $1.6 Billion Canadian-US Hydropower Project Approved
  • 6 days Venezuela Officially In Default
  • 6 days Iran Prepares To Export LNG To Boost Trade Relations
  • 7 days Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 7 days Saudi Oil Minister: Markets Will Not Rebalance By March
  • 7 days Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 7 days Rosneft Announces Completion Of World’s Longest Well
  • 7 days Ecuador Won’t Ask Exemption From OPEC Oil Production Cuts
Alt Text

The Wireless Power Grid: More Than A 100 Years In The Making

In fulfilling Nikola Tesla’s dreams,…

Alt Text

Energy Majors Hit Hard By Climate Regulations

Siemens and General Electric have…

Alt Text

GE Looks To Divest Energy Assets As Turmoil Continues

General Electric’s turmoil continues as…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Has U.S. Gasoline Demand Peaked?

Gasoline

Several years of low gasoline prices have upended a decade-long shift towards more fuel efficient vehicles in the United States. For two years in a row, the U.S. auto industry broke new records for total sales, as an improving labor market and cheap gas induced more motorists to take to the roads.

Car and trucks sales topped 17.5 million in 2016, the highest on record. At the same time, the industry is dealing with oversupply as automakers ramped up manufacturing capacity for sedans and lighter-vehicles in preceding years, which ran headlong into an era of rock bottom gasoline prices. Motorists have fallen back in love with gas guzzlers since 2014, taking advantage of the cheapest gasoline seen in years. So even as automakers are selling record levels of vehicles, they are having to offer steep discounts for sedans to unload inventory and are even temporarily shutting down production lines in order to focus more on SUVs and trucks. Ford recently announced that it would cancel a production line of sedans in Mexico.

The makeup of the U.S. auto fleet is changing, with 60 percent of auto sales in 2016 coming in the form of light trucks, which is an increase from the 56 percent share that trucks captured in 2015. For a stretch of time back in 2012-2013, when oil traded above $90 per barrel, auto sales were roughly split between cars and trucks.

Related: Why Russia Expects $40 Oil This Year

As the result of a shift towards heavier SUVs and trucks, U.S. gasoline demand has climbed. Consumption is always seasonal, but the annual peaks began to decline after the financial crisis as a tepid economy combined with fuel efficiency efforts cut into demand. But the collapse of crude oil prices in 2014 reversed the trend, with consumption rising substantially over the past three years. That has led to the average fuel economy of the entire auto fleet to stagnate at 25 miles per gallon, where it has stayed since 2014.

(Click to enlarge)

There is no guarantee that U.S. gasoline consumption will continue to expand, however, particularly now that oil prices are on the rise. According to GasBuddy, American motorists could end up spending an additional $52 billion on gasoline in 2017 compared to last year. GasBuddy estimates gasoline prices will average $2.49 per gallon this year, compared to the 2016 average of just $2.13 per gallon. “It may be years before some of the low prices we saw in 2016 come back,” Patrick DeHaan, Senior Petroleum Analyst at GasBuddy, wrote in a research note.

The same is true for the airline industry. After seeing seven consecutive quarters of cheaper jet fuel, airliners are going to have to pay more for fuel this year. That will translate to more expensive flights across the globe. On top of higher labor costs and industry consolidation, ticket prices could be heading up, which could put a dent in demand.

Over the longer-term, consumers will be offered a lot more choices for fuel-efficient and electric vehicles. Tesla announced this week that its gigafactory in Nevada has started mass production of lithium-ion batteries hat will be used in its vehicles as well as its home energy storage systems. When production reaches its peak next year, the factory will be producing about as much battery capacity as the rest of the world combined. The added supply will bring down costs, allowing EVs to become more affordable. Related: 2017 – A Quiet Year For Oil?

A dozen or so additional EV models will hit the market in the next three years, including the new Tesla Model 3 and the Chevy Bolt. But automakers continue to release details on plans for new models.

Perhaps most intriguing was Ford’s announcement that it would offer an electric-hybrid version of its F-150 truck, the best-selling vehicle in the entire country. It will also release an all-electric SUV with 300 miles of range. Both could be in production by 2020.

In short, the three-year surge in gasoline consumption between 2014 and 2016 could be fleeting. Over the next year or two, gasoline prices will rise, which could put an end to expanding demand. Over the longer-term, not only are smaller cars becoming more efficient and even electrified, but so are gas guzzling SUVs and trucks. If the top selling truck, the F-150, sees a dramatic increase in fuel efficiency, then U.S. gasoline demand could really begin to enter a permanent, if gradual, decline.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • Joe on January 06 2017 said:
    The 17.5 million vehicles sold is about 6 % of the 252 million cars and trucks on the road in the USA right now. The average vehicle age is 11.2 years. I would assume that most vehicles purchased today will still be on the road 11 years from now (except for the ones getting wrecked). Anyone have the number of electric vehicles sold last year?

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News