How working from home has affected the spring driving season in the United States

How working from home has affected the spring driving season in the United States

Oil demand is an important variable to gauge the future direction of its market. Since gasoline demand in the United States alone accounts for almost 10% of global demand, it is important to track gasoline consumption in the country.

In the United States, almost half of the demand for refined petroleum products is for gasoline. Americans consumed nearly 8.8 million barrels per day of nearly 19.8 million barrels per day of refined products worldwide last year, according to the US Energy Information Administration.

Memorial Day, May 30, usually marks the start of the summer driving season in the United States, which means there will likely be a continuation of the steady upward trend in gasoline. The driving season officially ends on Labor Day on September 5.

However, this year, gasoline consumption in the United States is not following the traditional strong seasonal growth seen in previous years.

According to the EIA, the average amount of gasoline consumed per day in May was about 8.9 million barrels, up 2.7% from the same period last year and a drop of 6. 1% compared to May 2019.

Between March and May, demand increased by only 1.3% this year, which is lower than the increase of 5.2% between May and March in 2019 and 11.9% between May and March of Last year.

From a price perspective, retail gasoline prices increased by 48% between March and May this year, while decreasing slightly by 1% between May and March in 2019 and a jump of 44% between May and March of last year.

To be sure, the pandemic’s pent-up demand has skewed the relationship between gasoline prices and consumption. However, demand has increased despite relatively higher retail prices.

In the fourth quarter of last year, gasoline consumption increased sharply compared to the same period in 2019. Retail prices have been gradually increasing since the beginning of this year, in line with the recovery in oil demand, the supply limitations and the geopolitical situation. tension in Europe.

Gasoline consumption per day exceeded 9.1 million barrels in May 2021, while it hovered around 8.8 million barrels per day in May this year, a drop of about 300,000 barrels per day. day from year to year.

Since the beginning of the year, American motorists have been paying rising retail prices at the pump, despite a slight drop in April. In May, retail gasoline prices continued to climb and reached new highs. According to the EIA, prices hit $4.59 per gallon in the last week of May. Gasoline prices continued to rise 29 cents in the first week of June, pushing the average U.S. retail gasoline price to a record $4.92 per gallon.

Average daily gasoline consumption peaked between 2016 and 2019 at around 9.3 million barrels per day. Most of this consumption occurred during the summer driving season, when fuel demand was around 10 million barrels per day.

Retail prices will be crucial in determining the level of gasoline consumption for the rest of the year. In the longer term, if prices remain high, there will likely be a shift to more efficient vehicles as well as electric and hybrid cars, which will affect gasoline demand in the medium to long term.

Sales of electric cars have fallen slightly in recent years due to semiconductor shortages as supply chains remain strained following the health crisis. Potential demand for electric vehicles remains strong, with people apparently lining up to buy them.

However, the number of electric cars on US roads is still low. There are currently about 1.5 million electric cars in the United States, or just 0.5% of the 285 million vehicles on American roads. But sales are rising, while sales of internal combustion engine cars are falling.

Additionally, the pandemic-driven trend of working from home has continued. Many people now work from home at least part of the time and trips to the office are less frequent, perhaps only two or three times a week, reducing household gas consumption, especially for those who have a longer journey.

Short-term changes in driving behavior due to current high prices will affect gasoline consumption in the United States, although they have been modest so far. Over the long term, changes in the types of vehicles people drive and a gradual return to public transit will all affect gasoline demand.

Hassan M. Balfakeih is an oil demand specialist and former chief oil demand analyst at the OPEC Secretariat.

Disclaimer: The opinions expressed by the authors in this section are their own and do not necessarily reflect the views of Arab News