Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Here's Why U.S. Gasoline Consumption Won't Be Bouncing Back Anytime Soon

Published 07/23/2020, 05:28 AM
Updated 09/02/2020, 02:05 AM

The expectation that gasoline demand will rise and return soon enough to pre-coronavirus levels in the United States is simplistic at best.

The truth: the situation with gasoline demand in the US does not look optimistic. After months of disruption, it may be a while until real recovery sets in, given the several complicating factors behind continued low numbers.

Pandemic lockdowns in mid-March and April took a heavy toll on gasoline demand. With nearly every state urging residents to stay home and some even attempting to mandate lockdowns under threat of force, in addition to school and business closures, gasoline consumption plummeted by as much as 50% between the beginning of March and the beginning of April.

Gasoline Weekly Chart

By mid-April, when stay-at-home directives were relaxed, some Americans started driving again, and gasoline demand began to climb, steadily improving weekly throughout May and June.

Many analysts took this as a good sign, looking at data showing rising refinery utilization, mobility numbers from Apple (NASDAQ:AAPL) (which have since been found highly inaccurate) and figures from China that indicated that more Chinese workers were eschewing public transportation and choosing to drive.

The popular perception was that US gasoline demand was in the process of bouncing back to pre-coronavirus levels. Yet, despite being in the middle of the summer driving season in the US, the data currently show that gasoline demand has in fact not bounced back.

While it was clear months ago that gasoline usage this year would not reach typically elevated summer levels, demand has failed to return to even pre-coronavirus levels from early March—a time that normally sees much less driving.

Now, gasoline consumption is trending down. The latest data from GasBuddy shows it has dropped for a third straight week in the United States. GasBuddy collects data from retail purchases of gasoline at the pump as opposed to the EIA, which tracks gasoline deliveries from refineries to filling stations.

The most common reason given to explain why gasoline demand is slowing in the US rather than picking up right now is the continued positive testing for the coronavirus in three states that are usually responsible for 25% of US gasoline consumption—Florida, Texas and California. While it is true that some of the depressed gasoline demand comes from people choosing to stay home in areas of increased virus-positive tests, that’s only part of the picture.

Depressed Usage: The Complete Picture

Two factors even more critical to future gasoline demand in the US: the economy and the psychological impact of the virus.

Over 30 million Americans have filed for unemployment. Small businesses, which account for 44% of economic activity in the United States are closing—at first temporarily and now permanently—at rates so high it is impossible to measure right now. According to Yelp, more than half of the businesses that closed temporarily are now closed permanently.

A press release from the Alignable Research Center reported that 900,000 small businesses may have closed so far. Layoffs at large companies are just beginning, and with many school districts deciding against holding in-person classes, gasoline demand will not get nearly as big a boost as it should from commutes to school and work. On top of the functional results of closures, there is the impact of fear on the population that prevents summer travel, commerce and public interaction.

Recessions are not kind to gasoline demand, and this recession will be combined with the ongoing psychological paralysis that has many Americans terrified to leave their homes even to drive to the grocery store.

Some gasoline demand will return as the rate of infection slows in the major driving states, but by then, the hit from the recession will be in full swing. Market watchers must take into account the possibility that current levels of US gasoline consumption are about as good as they’re going to get for the rest of 2020, and factor that into considerations of oil price movement.

Latest comments

While demand may vary, supply is controlled by the oil cartel. The ball is in their court for now.
oil companies are corrupt. It doesn't matter what the demand is or what the price of oil is, they will always find ways to steal and cheat, and our lawmakers just look the other way because they are in on it.
as always, thank you for your articles. There are always many concise considerations utilized to derive your point, in which I appreciate.
Traffic jams everywhere again... Already... Your analysis looks like its got agenda written all over it. Stop trying to tank the stocks.
There are, but i live in the D.C. area and the jams are no where near pre-covid. Most of yhe feds are teleworking now. There are some real wotld implications. The airlines are no where near pre-covid consumption.
well,my country have interdiction to speak about uneemployment end the deficit fore PIB in Romania are integrate in politics fore the NATO economies.In fact White Hose is N.Y evolution but like Donald Trump is Christine Lagarde against the authority in economy fore salary! The minimum value fore salary is tehnically uneemploinent.
Let's not forget that more people than ever are working from home.
Lol. I work in the retail fuel industry and it already has rebounded. Its literally almost right back at pre-covid levels. A PHD doesn’t replace firsthand experience.
Almost sounds amateurish
Wow. I feel gas will rebound faster.
This argument is true then whiffs at the end with thinking this is peak 2020. Studies have shown herd immunity at 20% using NY as a model. We should reach 20% by end of sept/oct. demand should trend north as soon as schools reopen.
Nope, its recovered alot already and its now steady until the next move up. Were already at precovid levels at 8.5mbpd https://www.eia.gov/petroleum/weekly/images/gtpsusm.gif
Thank you.
I’ve been saying this exact thing, so i totally agree. I wish they’d do an article about how COVID deaths and the direct impact to GDP.
always appreciate your articles. thank you
Good, this should mean I get several more months to buy Exxon and Chevron at big discounts.
I think this means that the valuations of said companies might actually go down when the reality of the situation actually hits the overly optimistic market. That indeed means several more months of deals! ha ha 🤑🤑
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.