U.S. gasoline demand in the coming years may be higher than previously estimated due to a growing number of retirees hitting the road for leisure trips.
Changed demographics over the past decades means that a larger portion of the U.S. population is now retired and with the means and willingness to travel more. This could mean that Boomers could be the driving force behind a larger-than-expected gasoline demand in the United States, Mark Le Dain VP, Corporate Development at Canadian fintech Neo Financial, argues in an article in Forbes.
A trend of retiring in rural areas will also impact the number of miles traveled in vehicles and gasoline consumption, Le Dain says. Moreover, Boomers are less affected by prices when planning for road trips than younger generations such as Gen Z.
The share of retirees in the U.S. population has increased to around 17% this decade compared to just 10% back in the 1970s. Travel is one of the top activities and goals for retirees, so gasoline consumption could receive a boost from Boomers who are either retired or plan to retire soon.
“This trend can be expected to make demand, and inflation, more resilient,” Le Dain wrote.
Nearly half of all retirees cite travel, and a third cite spending on leisure or entertainment activities, as their top priorities for discretionary spending in retirement, aside from paying for necessities and routine bills, according to the 32nd Annual Retirement Confidence Survey (RCS) conducted in early January 2022 by the Employee Benefit Research Institute (EBRI) and Greenwald Research. The 2022 survey of 2,677 respondents aged 25 or older included 1,545 workers and 1,132 retirees.
After saving to grow money, travel is the top priority for the use of retirement savings for workers and retirees. Retirees are more likely than workers to prioritize spending on travel and home improvements, the survey found.
Gasoline demand in the United States may have peaked, but consumption is not expected to fall off a cliff, analysts say. It could even remain more resilient than expected, thanks to more travel from the Boomers demographic this decade.
In addition, fuel economy may be at its highest ever, but the market is shifting toward SUVs and pickups, which offset some of the gains from fuel economy.
Consumption in the U.S. has been lower than pre-pandemic 2019 despite people driving more last year than before Covid. That’s because the vehicle fleet has become more fuel efficient.
Annual U.S. consumption of gasoline will remain less than in 2019 – 9.3 million barrels per day – through the end of 2024, the U.S. Energy Information Administration (EIA) said last month.
Yet, people drove more in the United States in 2022 than in 2019, before the pandemic.
“We forecast this trend of increased travel will continue in the United States during 2023 and 2024, but increased vehicle fleet fuel economy will offset the increase in fleet vehicle miles traveled,” the EIA said.
Vehicle fleet fuel economy is the number of fleet vehicle miles traveled, including hybrid or hybrid-electric vehicles, divided by all gasoline consumption, also reported in miles per gallon, the EIA notes.
Vehicle miles traveled are expected to increase this year and next compared to 2022, per the EIA’s latest Short-Term Energy Outlook (STEO) published this week.
New vehicle fuel economy, however, is at 25.4 miles per gallon in the model year 2021, a record high, and preliminary estimates point to another record in 2022, according to the U.S. Environmental Protection Agency (EPA). However, market shifts away from cars and towards sport utility vehicles (SUVs) and pickups have offset some of the fleetwide benefits, the EPA says.
At any rate, gasoline consumption in the U.S. may have peaked, but it is not going anywhere.
“It will take decades for gas-powered vehicles to drive off into the sunset,” Rob Jackson, a professor of Earth system science at Stanford University, told Bloomberg last month.
By Tsvetana Paraskova for Oilprice.com
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