Colombia's plan to import natural…
Oil prices continued to climb…
U.S. gasoline demand increased slightly last week by 1.1% WoW as per GasBuddy, giving hope to the bulls that demand will not fall off a cliff as earlier feared. Gas prices have also continued to climb, with the national average currently at $3.825 per gallon compared to $3.538 a month ago as per AAA.
The Energy Information Administration (EIA) has reported that last week, U.S. crude inventories fell by 17 million barrels, the largest single week drop on record. Inventories have now declined to 440 million barrels, 1% below the five year average range for this time of year. Gasoline inventories stand 6% below the five year average for this time of year while distillate inventories are 15% below their five-year average for this time of year.
Many analysts have warned that U.S. gasoline demand is unlikely to rescale the pre-pandemic peaks of 2018 thanks in large part to the energy transition and growing EV sector. However, the pace of decline remains uncertain, illustrating the challenge for experts to forecast how the shift to a low-carbon economy will impact the oil and gas sector.
The EIA has revised its gasoline demand forecast several times this year: in January, the energy watchdog pegged demand at 8.74 million bpd, a fall from last year’s 8.76 million bpd. However, it upped its forecast in July to 8.92 million bpd - up from last year but 410,000 bpd short of the 2018 average annual record.
The transportation sector is responsible for nearly 60% of global oil demand, with passenger vehicles and trucks guzzling the lion’s share. EV sales are surging thanks to a combination of new compelling models from automakers, improvements in battery technology, policy support and more charging infrastructure. Electrification is also beginning to spread to new segments of road transport.
While there’s no denying that the rapid adoption of EVs is bad news for global oil demand, it’s not as dire as some analysts have claimed. BNEF estimates EVs are currently displacing 1.5 million barrels of oil demand per day, good for 3% of total road fuel demand. But projections of the EV growth trajectory are all over the place, making it difficult to estimate how much impact the sector will have on future oil demand.
By Alex Kimani for Oilprice.com
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.