Watching for the EV drag on gasoline demand requires a lot of patience.
By Wolf Richter for WOLF STREET.
Gasoline consumption in the US during the four-week period through February 5 was down by 10.1% from a year ago to 7.89 million barrels per day (mb/d), according to EIA data. Gasoline consumption has been down in the range between 9% and 13% since mid-July, following the initial bounce-back from the collapse in March and April:
That Pandemic level of gasoline consumption below 8 mb/d was something that last occurred during the 1990s.
The effects of the pandemic – massive unemployment and working from home, partially balanced by driving instead of taking mass-transit and flying – are short-term factors that have hit gasoline demand, though they too may entail long-term shifts.
But there are also long-term structural demand issues: Peak consumption just before the Pandemic was just barely above the peak before the Financial Crisis 12 years earlier, with a big trough in between:
The EIA tracks consumption of fuel in terms of product supplied by refineries, blenders, etc., and not by retail sales at gas stations.
The structural demand issues become clearer when gasoline consumption is seen in light of population growth. On a per-capita basis, gasoline consumption peaked in 2004 at 477 gallons per person during the year, using Census Bureau population data. This includes gasoline consumption by commercial vehicles, such as delivery fleets, and by taxi and rideshare operations. By 2019, it had dropped by 8.8% to 435 gallons per person. Then in 2020, it plunged by another 13% due to the effects of the Pandemic, to 378 gallons per person, down 21% from the peak:
Watching for the EV drag on gasoline demand. Not yet visible.
The big structural issue facing gasoline consumption years down the road is the increased use of EVs. They will eventually make a visible dent into gasoline consumption as they replace internal combustion engine vehicles one by one. But it will take many years. A number has been thrown out there to end ICE vehicle sales: 2035. Even if that’s the final word, which I doubt, then it would still take 20 more years from then on to age out most of the remaining ICE vehicles in the fleet.
So the impact of EVs on gasoline consumption is going to be gradual and should become visible over the next few years, but in baby steps.
And it should be accompanied by a visible increase in electricity consumption. But that hasn’t happened yet either, not even in California, the hotbed of EVs in the US.
In California, electricity sales to end users have been falling since 2008, driven in part by the widespread change-over to efficient florescent and LED light bulbs and other efficiency measures. In 2019, the latest data available from the EIA, electricity sales to end users in California — such as households, businesses, government offices, schools, and, well, EV charging stations — fell to 250,378 gigawatt hours, the lowest since 2003:
Rising electricity demand would be the best thing that could happen to electric utilities. They have been mired in a declining industry for over a decade. They’re praying every night and every day for the soonest possible massive arrival of EVs to pull them out of this morass.
What is ideal for utilities: Demand from EVs would largely occur at night when people top off their EVs at home to replace the juice they’d used for the 20 or 30 miles they drove during the day. At night is when utilities sit on costly idle capacity, and EVs would allow utilities to utilize the idle capacity at night and make some money on it.
Jet fuel demand still in a depression.
Twelve months into the Pandemic, airlines are still struggling with a 60% to 65% collapse in the volume of air travelers, and they’re flying far fewer passenger planes than they used to fly, and many of those flights are far from capacity. Some airlines, including Delta, are still blocking the middle seat. The saving grace has been red-hot demand in the airfreight business.
And jet fuel consumption for the past four weeks through February 5, at 1.08 mb/d was still down 33.6% from a year ago:
This consumption level of 1.08 mb/d, despite the bounce-back after the initial collapse in March and April, is still below the 30-year data range. Note the drop after 9/11, and the second drop during the Financial Crisis. It took till 2017 before the pre-9/11 peaks in 2000 and 2001 were seen again:
During each crisis, the airlines get rid of their oldest most inefficient planes up front – they retire them, they sell them for freighter conversions, they sell them to whoever wants them, or they leave them parked in the desert, but they don’t fly them. They fly their most efficient aircraft with the lowest operating costs. And as demand recovers, they take delivery of aircraft they’d ordered years earlier. And the industry’s overall efficiency goes up – and jet fuel demand takes a hit.
Distillate demand has fully recovered but remains below 2007 peak.
Distillate includes a broad range of fuels, dominated by diesel for trucks, locomotives, and equipment for construction, agriculture, oil-and-gas drilling, mining, etc. It also includes fuel oils for heating and utility-scale power generation. And distillate demand has now fully recovered.
The four-week moving average of consumption through February 5, at 4.1 mb/d, was up 1.9% from the same period last year and has been in the positive range since before the holidays, as the transportation sector has been reeling under the onslaught of demand from ecommerce, and more generally from the shift by consumers from spending money on services – such as flying – to spending money on goods. And goods have to be transported:
Nevertheless, peak distillate consumption on an annual basis was in 2007, as demand from power plants has declined to minuscule levels:
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