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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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What’s Really Happening With Gasoline Demand?

  • As President Biden is reminding everyone who will listen, gasoline prices in the United States have been falling for 50 days straight.
  • A debate has been raging over exactly how much demand for gasoline has fallen, but it certainly appears to have been one of the weakest driving seasons ever.
  • Now, as prices fall, the question all analysts are asking themselves is whether demand will bounce back, sending gasoline prices soaring again.
Gasoline Demand

President Biden recently boasted on Twitter that gasoline prices in the United States have been falling for 50 days straight, noting this was the fastest decline in a decade.  The president added a sort of infographic to his tweet informing us that 50 percent of gas stations sold gasoline for $3.99 or less a gallon. What he forgot to mention was that demand for gasoline has been behaving very unnaturally for this time of year.

Standard Chartered this week released a commodity alert that said that this year, driving season in the U.S. never really materialized. The report noted substantial demand declines for both June and July, adding, however, that the recent price decline should result in a pick-up in demand this month.

There has been a lot of talk about the cure for higher oil prices being higher prices still. It appears this might have happened in the U.S. as prices for gasoline earlier this year hit the highest level in several decades. And the national average is still above $4 per gallon, according to AAA.

No wonder then, with inflation raging on, people are opting not to drive, which is affecting demand. According to StanChart data, in July, gasoline demand in the U.S. dropped by 7.6 percent on the year to 8.592 million barrels daily, which, the report noted, was the lowest demand level since 1997 except for the lockdown-heavy 2020.

The Energy Information Administration, however, had a different data interpretation. According to that interpretation, the above gasoline demand figure was as much as 1 million bpd lower than demand during the lockdown-stricken July of 2020.

Bloomberg’s observation about gasoline demand trends made a splash on Twitter, prompting a lot of analysts to weigh in on the discussion of whether it is possible that this year’s driving season could have been worse for gasoline demand than the lockdown summer of 2020.

Different datasets were noted in the debates, such as GasBuddy’s, which reported a slight increase in demand last week, for example. GasBuddy’s Patrick DeHaan noted the different methodologies of measuring demand and one very, perhaps the most, important difference in these methodologies.

The EIA uses what it calls implied demand or, per its report, “product supplied” by refiners to fuel retailers, while GasBuddy works with the amount of gasoline actually sold by fuel stations. Some accused the EIA of skewing the numbers. Others noted that the weekly numbers for demand are flawed and that errors have been made in the past, too, leading to the wrong estimate for July demand.

Related: Oil Prices Climb Even As Payroll Report Surprises

While the debates continue, one thing nobody is arguing about is that U.S. drivers are driving less, and even the 50-day straight price decline has not been enough to motivate them to start driving more – that during the season when everyone travels more, normally.

The StanCart analysts noted in their report that “The average US price of retail gasoline has fallen by more than USc 80 per gallon (16%) since the mid-June peak, which should support demand in August. However, we think the theory that the US market will bear gasoline prices of USD 5 per gallon for an extended period has now been tested to its destruction.”

Indeed, whether or not demand for gasoline was lower this July than in July 2020 is not as relevant as the answer to the question of why, despite such a stable and continued decline in prices, Americans are not driving more.

The most obvious answer would be, of course, inflation. Economists, government officials, and journalists are debating the definition of recession, whether or not the presence of a recession on the United States’ books is relevant to anything, and whether the current situation is not a masked form of economic growth.

In the meantime, the actual prices of actual goods and services are rising. As prices rise, consumption begins to dip. The longer prices rise, the more consumption would dip unless income is adjusted accordingly, which doesn’t seem to be happening yet.

Gasoline, as a fundamental commodity that pretty much everyone uses in one form or another, is no exception. May and especially June saw all-time highs in gasoline prices. It was a matter of time before these record-high prices began to hurt demand, leading to lower consumption and, consequently, lower prices.


It is therefore questionable how much credit for the 50-day price decline in gasoline the Biden administration could reasonably claim. They did not exactly open more refineries or stimulate more oil drilling - and even if they had, it would have taken time to get that new production to the market.

It was largely market forces that led to the lower prices. And also to lower consumption that may or may not have been even lower than consumption during the lockdown summer of 2020. Now, with prices lower, demand will very likely start picking up, as suggested by GasBuddy’s real-life data. The more important question then would be how long it will be until prices start climbing up again amid extra-strong exports of both gasoline and diesel.

By Irina Slav for Oilprice.com

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  • Darrel Farris on August 06 2022 said:
    Let's not forget about all of the school busses that will be fired up in the next week or two. Diesel prices are going to go farther thru the roof.
  • Gary McMillan on August 06 2022 said:
    I know there isn't any data to support my theory but it's a plausible guess this heatwave had something to do with Gasoline demand. I can't speak for the rest of the country but down here in Texas it doesn't seem rational for people to want to drive around in 110 degree heat to do much of anything. I didn't cut my grass for a month. Going to the beach obviously never crossed my mind.
  • Mamdouh Salameh on August 07 2022 said:
    Other than the usual market forces, what is really behind the fall of gasoline prices and demand in the United States is rampant inflation hitting 9.1%-10.0%.

    For the Americans whom driving is part of their DNA to reduce driving means one thing, namely inflation causing rising costs of living and seriously cutting into their purchasing power. If the choice is between driving as usual or feeding their families and paying soaring energy bills and mortgages, the answer is extremely simple. The overwhelming majority will opt for the most essential.

    However, even a rampant inflation has a limit to how much it can reduce gasoline demand beyond which it starts to adversely affect the running of the economy.

    With measures by the US Federal Bank for the control of inflation, demand for gasoline will start to recover quickly aided by lower prices.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • George Doolittle on August 07 2022 said:
    There's no such thing as "demand destruction."

    There is what's called a "Substitution Effect" however absolutely as happened in Great Britain when the Turbina was first revealed and the Age of Coal suddenly seemed to have appeared to be at an end on or about 1906 maybe? Obviously in the USA the exact opposite became the case as coal *BOOMED* as a fuel BEGINNING on or about 1906 all the way through to about a decade ago when natural gas suddenly found coal to be substituted out for the most part *AND ONLY IN THE USA.* now incredibly the USA has suddenly become even a massive exporter of both natural gas and of course liquified natural gas (LNG) as well.

    When prices collapsed back in 2014 to basically *nil* this led to a massive economic boom in the USA which lasted in effect up until 2022 this Year.

    Now yes indeed energy prices both set as a futures product and at retail are very high but of course the USA has the Tesla "Supercharger Network" now as well which are distribution points for the storage and selling of *ELECTRICITY* not gasoline, diesel fuel, natural gas etc. Rivian apparently is readying much the same but for what is known as *austere* or *upon the pathway* environment. If I can charge up a two wheel scooter from "some place in the Woods" that could have a truly awesome (meaning exceptionally large) impact upon the US economy as the need for a traditional highway approach to fueling could become dramatically impacted.

    Might explain the huge increase in solar panel demand in the USA anyways...a product also produced by Tesla in point of fact.

    And of course as with oil and natural gas so too electricity is traded as a "futures product" so if the market for buying and selling electricity futures soars that in and of itself could cause a material impact upon trading literally any other commodity period in the USA but of course still gasoline futures, diesel fuel futures, natural gas futures, corn futures contracts, WTI futures contracts, WCS futures contracts etc etc.

    Shipping is a very complex subject in the USA as well as there is no futures contract be had either buy or sell for that. That's *SUPPOSED* to make shipping very expensive in the USA which indeed is true at the moment...but there have been times when this is not the situation indeed exact opposite situation be true (Erie Canal Bonds.)

    Shipping costs in the USA in the 1930s were in point fact near to almost zero most famously expressed by the spectacular rise and fall of the Flagler Railroad along the entire Eastern Spine of the State of Florida that single handedly created today's modern Port of Miami, Florida.
  • David Mitchell on August 08 2022 said:
    Anecdotally speaking, I am retired and drive a truck that gets 12mpg. I probably fill up 4 times a year as opposed to roughly 12. The problem comes in when I get accustomed to this, my demand probably won't be going up much when prices get back to $2 a gallon. I do side work in auto repair and 9 times out of 10, the parts are delivered to my door. This started in the name of economy but will remain as a convenience.

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