Has Gasoline Price Shock Triggered Demand Destruction Yet? And Where Will Gasoline Prices Go from Here?

There’s some demand destruction. But oil bounced again, gasoline might be next. My guess is a long-drawn-out zigzag higher.

By Wolf Richter for WOLF STREET.

Following the dizzying spike in gasoline prices, the question arises when demand destruction will set in, where people start driving less, start taking it easier to conserve gas when they do drive, or start prioritizing the most economical vehicle in their garage. If enough people do it, demand begins to decline, and gas stations have to compete for dwindling business. Demand destruction is what would cause the price to come down again. Are we there yet?

The Energy Department’s EIA measures consumption of gasoline in terms of barrels supplied to the market by refiners, blenders, etc., and not by retail sales at gas stations. The volume of gasoline supplied has fallen for the third week in a row. This is unusual this time of the year, when gasoline consumption normally rises through the summer.

The EIA reported on Thursday that gasoline consumption fell to 8.61 million barrels per day in the week ended April 8 on the basis of a four-week moving average (red line), the lowest since March 4, down 2.3% from the same period in 2021 (black line) and down 8.1% from the same period in 2019 (gray line).

Consumers began to react in January.

Note how the past 11 months (red line) tracked the pre-Covid period three years earlier very closely (gray line) until they began to diverge sharply, not just in March, but already in mid-January, and have been solidly below the 2019 level ever since.

Gasoline prices started shooting higher from collapsed levels in April 2020. By May 2021, the average price of gasoline, all grades combined, breached $3.00 a gallon, a multi-year high, and kept going. In November 2021, it hit $3.40 a gallon and took a break. Then in early February, it started spiking higher and in historic leaps hit $4.32 on March 14.

But since mid-March, the price has ticked down. Now at $4.09, it remains nosebleed high but is a little lower than it was:

Gas stations don’t lower prices out of the goodness of their heart. They lower prices because sales are getting hit, and price competition has set in among gas stations in an effort to maintain sales volume. And gas stations could lower their selling price without taking a hit to their profit margins as the costs of their product also declined.

Demand destruction that hits gasoline would then be passed through to crude oil demand. But crude oil has far broader uses than just gasoline, including the booming petrochemical industry. And a small decline in demand for gasoline in the US isn’t going to shake up the global crude oil markets all that much.

The price of crude oil already bounced again.

Crude oil grade WTI had spiked to $130 a barrel and then fell back into the mid-$90 range. In recent days, it has changed course again and hit $106 now. This is not a good sign for gasoline prices.

Clearly, there has been some demand destruction, and perhaps this was enough to cause the price of gasoline to come back down a little.

But maybe it wasn’t. Maybe this demand destruction wasn’t the cause of the decline in gasoline prices. Maybe they fell for some other reason, such as the current volatility that has hit everything. The wild dynamics of the commodities markets see to that.

My guess: gas prices will rise again.

I can see the demand destruction, but for now I remain doubtful that it is big enough to cause a lasting decline in the price of gasoline. I would not be surprised if the price starts heading higher again. Crude oil prices have already started heading higher again. This could be a long-drawn-out process with prices being very volatile and zigzagging higher and higher. That’s my guess.

What we do know.

Annual gasoline consumption hit a peak in 2007 and then declined over the next five years through 2012 by a total of 6.3%. It then rose again, and hit that 2007-peak again in 2016, and again in 2017, and in 2018, and again in 2019, without going beyond it. And then in 2020, consumption collapsed. In 2021, consumption recovered sharply, but the annual total consumption ended the year still down 5.3% from 2007!

But total vehicle miles driven hit a record every year from 2015 through 2019. And in 2021, despite the collapse in 2020, miles driven were up 6.6% from 2007. People are driving more, but they’re using less gasoline to do so:

So, there are many other factors that play into gasoline consumption, not just price. This includes long-term technology trends, such as more fuel-efficient vehicles, and the arrival of EVs on a scale that is now large enough to make a dent into gasoline consumption.

Other changes also impact gasoline consumption, some of them dating back well over a decade, such as the building boom of high-rise residential towers in urban centers that reduced or eliminated commutes-by-car for residents; or the trend of working from home at least part of the time that also cuts commuter miles.

Pulling in the opposite direction was the increase in driving vacations during the pandemic, that may by now have been superseded by flying again (domestic leisure traffic is up).

Gasoline consumption is also highly seasonal, which makes it even tougher to spot where demand destruction has occurred due to price, and where unusual seasonal patterns could be at play.

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  172 comments for “Has Gasoline Price Shock Triggered Demand Destruction Yet? And Where Will Gasoline Prices Go from Here?

  1. Anthony says:

    When it comes to the RV trade and miles driven, I’m not sure how many use petrol rather than diesel. I know in Europe they are mainly diesel, which brings me to the point that there appears to be a world shortage in the refining of diesel. I’m not sure how this will effect prices in the US but in the UK, diesel prices have exploded way past those of petrol. In US prices, something like 60 or 70 cents a US gallon.

    • economicminor says:

      I read a piece a couple of weeks ago on diesel. I didn’t know that it takes a lot of NG to remove sulfur. As the price of NG has gone up, so has the cost in making low sulfur diesel. Also, there is more *dirty* crude on the market requiring more processing also raising the prices. That’s what I read anyway.

      • sunny129 says:

        economicminor

        The Heavy Crude oil from Russia was favored to refine into Diesel compared b/c the cost doing from Light crude, fairly available out side Russia

        Besides look at the ALL the products dependant in the modern economy on the oil/gas. ESG won’t cut it, as of now.
        In sum: No economy without without affurdable, accessible Energy!
        Trading in both long/short will be for a long time.

        If recession comes faster than anticipated, it is a different story.
        ‘SOFT landing” delusional thinking at Fed and Treasury!

  2. Depth Charge says:

    I know I continue to cut back. I decided against a day trip today because I just didn’t want to burn the fuel. I hear friends and family saying the same.

    • Peanut Gallery says:

      Thanks for the helpful anecdote. My family and I also drive less than 1/3 of what we used to.

      So… Was the COVID response at least in part about curbing gasoline consumption and sticking it to OPEC?

      • Peacefuldaizy says:

        I’ve wondered that myself.

        • joedidee says:

          just filled up with $5 diesel
          ready to hit road tomorrow for short 3 day at near(100 miles) park
          vroom 8mpg here we come

    • MiTurn says:

      DC,

      Us too. We coordinate our trips now more carefully, make one visit to town with multiple stops, rather than multiple visits with only one or two stops.

    • Augustus Frost says:

      My main motivation for driving less isn’t gas prices, it’s traffic congestion. I was off Friday, went to meet someone for lunch, and the traffic was backed-up on I-285 W between US-78 and I-85.

      This is at noon and it’s about five miles, in the middle of the day and supposedly not during rush hour. I say “supposedly” as it’s increasingly irrelevant what time of day or day of the week, the traffic just sucks here all the time.

      I presume it was somewhat due to driving out of town for Easter but who knows. I don’t ever remember this being much of out-of-town weekend around here.

      • COWG says:

        Snowbirds heading home one way, beach queens going the other…

        Add in the folks stuck on I- 285 loop for several hours because they can’t figure out how to get off of it…

        • TimTN says:

          As someone that lived in Atlanta for 20 years (no more), this one gave me a good laugh.

  3. Harrold says:

    Russia sanctions are still not factored in. If the world actually loses 10% of oil production, prices could go WTF again. Either that or 10% of demand just stops bidding, which would mean economic contraction. Right now, the US is playing games with the strategic reserve, so consumers aren’t really seeing the full impact of this.

    I don’t see this resolving once the shooting in Ukraine stops. The US will be punishing Russia for the rest of our lives. How do I know this? Because it has been going on for our entire lives.

    • Augustus Frost says:

      Your premise is flawed, as someone else is going to buy Russian energy regardless of what the US does or doesn’t do. So, if anyone wants to pay more for no apparent reason, go ahead and do it. It’s more empty virtue signaling.

    • andy says:

      What you have they call psycho. There is no cure.

    • sunny129 says:

      Harrold

      What stragic ‘reserve’ of releasing 30 or 50 or even 100 Millions of Barrel, do when USA is almost 20 Millions/ a DAY! A political stunt!
      LOL!

      • Flea says:

        U fool they will release at 105$ a barrel and restock at75$ easy to figure out

    • Jeff says:

      Russians are our natural friends. Now the Bolsheviks that are still hanging around both there and here are a different story.

      Or perhaps you can enlighten everybody as to why you think Russia should be completely destroyed.

    • roddy6667 says:

      The Belt And Road Initiative is the new future. China and Russia, all the “stans” from the old USSR, and eastern Europe, will be one economy. It will not need America. No way to punish them. All these sanctions by America just end up hurting Americans, anyway. You won’t have to worry about big bad China and Russia. They will be in a parallel world.

    • Ron says:

      Russian crude is taken up by China and India. They are currently foregoing their current suppliers (note: Russia was a big exporter to India). So same volume (more or less), just moved around…

  4. Alex Radcliffe says:

    I’m seeing more people on bicycles everywhere.

    • COWG says:

      Me too…

      But down here in old people/ poor eyesight land, they are usually in the ditch or in the back of an ambulance…

      • Anthony A. says:

        My 70 year old neighbor a few houses away got a bicycle two years ago to save on gasoline. We live in a 55+ community which I refer to as “Gods Waiting Room”. Helmet and all he took a dive and banged his head pretty bad….brain bleed, then stroke, then funeral. He did look good on that bike, though!

        Old folks need to stay off bicycles.

        • Ted says:

          I’m and old guy and I’ve ridden my bike 50 miles a week for many years with no problem. However, all my riding is on Forest Preserve bike trails. Riding on public highways is goofy.

        • Dan Romig says:

          Anthony A.,

          Grandpa Nick was a track racer a century ago. He did Madisons in Madison Square Gardens (hence the name of the type of racing). Until two years before his death at age 83, the road his fixed gear track bike for a couple miles everyday in Deerfield Beach, Florida.

          I turn 60 this summer, and Grandpa would be proud of his grandson. I ride everyday for about an hour, as fast as I can. And I sure as hell will ride for as long as I am physically (and perhaps mentally — down the road) able to do so. I’m long ago retired from racing against other dudes, but I know Father Time is closing in behind me, and I want to stay in front for as long as I can. That’s my motivation when I get on the saddle.

          I would bet Wolf’s gonna swim in the Bay for many, many years to come, with the same mindset.

          I’m just sayin’ ….

        • Seen it all before, Bob says:

          I’m not 70 but I take the bike out at lunch in my casual shorts on side streets for an hour a few days a week.

          4 miles down to the library or to pick up a few things at the grocery store. 4 miles up 600 feet back home.

          It takes me about an hour at 10 mph on my 1990’s vintage 15 speed.

          It gives me a break from work, in the sun for an hour, with low impact on my old knees. The endorphins keep me cool and collected for the rest of the day’s meetings.

          I never had the mid-life crisis to make me buy a ultra-lightweight bike with racing shorts and jersey. Maybe at 70 I’ll experience that.

        • Anthony A. says:

          Dan and Bob, please don’t take a dive and bang your head too hard.

          This neighbor certainly was not that experienced as many like you are. Plus, around here is completely nutty traffic with a high school and college in the immediate neighborhood. Which means young people are texting while driving. And our neighborhood is full of old folks, many of which should have their car keys taken away.

          Two of my 75 year old ROMEO friends had bad falls in their homes last year and both ended up with brain bleed and were in the ICU. One had a hole drilled into his brain area to relieve the pressure. Both are OK now.

          Old is good if you are healthy like me at 78+, but I don’t take chances and try to minimize risk. My motorcycle days are over and I now no longer run long distances as my surgeon who installed both my two titanium and ceramic hip replacements said it’s not recommended. So all that’s left is walking a lot and playing golf each week.

          There are plenty of 60 people riding bikes and that’s wonderful if you are experienced, have the right gear, and stay out of high traffic areas.

        • 91B20 1stCav (AUS) says:

          AA-reminds me of the ’90’s and the lack of basic respect many riders had for the machine. Motorbike fatalities increased, primarily from the big expansion of middle-aged/retiring folks who decided to live their Fonda/Hopper dreams by acquiring a shiny new H-D or similar, but absent any seat time/skills maintenance-improvement since their rides on a Z50 or Rupp in their youth (“…OF COURSE i know how to ride!…”). Would posit that similar reasoning exists with bicycles now. In any case, it helps one’s cause on two wheels to realize that it’s combat flying, physically and mentally, then practice accordingly…

          may we all find a better day.

        • Dan Romig says:

          91B20,

          Yes, you are so right. It is combat out there. One of my tips is to keep an eye on the front wheel of a vehicle, especially large trucks, when they move alongside side you closely and there is anything they may do other than continue going straight. For example, an intersection is nearing.

          Why? Because if the front tire turns towards you, in a split second, so will the vehicle. But that split second is sometimes the difference between trouble or safety.

          And I am getting confident riding my motorbike after two years of owning it. That being said, it has my utmost respect, and I will never be on it without proper gear and the understanding of what my limits are. The machine’s limits are way above my skill set. I do love the adrenaline it provides me though! It is a true thoroughbred that feels like part of me when I’m riding it.

          Gasoline:
          91 octane non-oxy where I go in St Paul is now $4.34 per gallon. Fifty bucks filled up my Lexus RX450h this morning.

          Ride safe out there!

        • 91B20 1stCav (AUS) says:

          DanR.-and you, as well.

          may we all find a better day.

        • Seen it all before, Bob says:

          Thank you Anthony A.

          I am as conservative in my bicycling as I am in my walking.

          Either could result in falling down resulting in a head injury if done improperly.

          Both, when done correctly, are safe.

          I suspect swimming results in less head injuries, but only after the initial dive.

          Life is dangerous to the uncareful.

      • Dorothea Lange says:

        I read about a study done a couple of years ago comparing people in their 80s who rode bikes regularly, to those who didn’t. Those who rode had a physical age similar to someone in their 50s.

        As usual with medical studies, they didn’t include women, only men, but it’s still inspirational. My landlord, about to turn 70, is a serious bicyclist, riding 10+ miles daily. I don’t see him stopping anytime soon, and he’s super-fit.

  5. Nathan Dumbrowski says:

    Still waiting for the SoCal stations to go over $7. Close but haven’t seen it yet. It is depressing to see gas that high. I too am always thinking do I need to drive 30+ minutes for this or that. It impacts my daily choices at this time with the rate

    thank the blessing of having a full-time work from home gig. However they have started to make many of the workforce return in some capacity

  6. Brian says:

    I don’t see any demand destruction where I live. Plenty of vehicles on the roads, work traffic and recreational. Gas prices will continue to rise even without war price shocks. All the car companies are moving to electric come hell or high water. It’s an agenda.

    • Jay says:

      Unseasonal adjusted, demand destruction will become obvious when people start to lose their jobs. I see first time unemployment filings to rise to about 275K by late this year. Between now and then, there won’t be a substantial amount of demand destruction, rather just small to modest decreases which will portend the coming mild recession by about 1st Qtr 2023. I think the next recession will be somewhat mild but will last longer than usual, or about 6-9 months. March / April 2020 really doesn’t qualify for a recession. It was so short lived and that’s what happens when you shutdown 1/2 the economy. Obviously, everything bounced back nicely, it just took way to long for the mandates to end.

    • Anthony says:

      Brian,

      You now have to work out the new price of electricity, as it appears to be rising as much as petrol/diesel prices. Where I live natural gas and electricity is up 60% over the last 12 months……

  7. SpencerG says:

    The price of gas usually depends on what the Kingdom of Saudi Arabia wants it to be. They control the crude oil spigots… their latest gambit in December of 2020 was to reduce their production by a million barrels a day (roughly 10% of their production). This paid off very well for them… the other 90% that they are putting on the market has DOUBLED to TRIPLED in price. THIS TIME the American oil frackers were in no big hurry to increase production… they learned the lesson that the Saudis beat into their heads on the previous TWO occasions.

    Obviously the war in Ukraine has also had an effect. Over the long term it is hard to know how that plays out. Europe may well cut its dependency on Russian oil but that just means that the Russians sell it elsewhere at a discount for a while. It won’t lower the price that Americans pay at the pump because it doesn’t affect the overall supply of oil on the market.

    What could LOWER the price of oil/gas in short order is a nuclear deal with Iran. The Iranians currently have close to 100 million barrels of oil sitting in storage ashore and on ships at anchor. There is no way that the Saudis want them to be paid $106 a barrel (or higher)) for that oil. The Saudis will turn their spigots on the second they get wind of such a deal.

    Over the long haul… who knows? On the one hand Americans love pickup trucks… and American vehicles last a long time now. On the other hand EVs will eat into gasoline sales.

    • tindrum says:

      “What could LOWER the price of oil/gas in short order is a nuclear deal with Iran…”
      Russia is involved in this JCPOA project and has a veto. Right now I do not think that Russia and America are besties…

  8. Michael Engel says:

    1) Two years of hypodermic backwardations.
    2) NDX Apr 11/14 a tiny, but a rare triangle. The front end, on the left, is smaller than the one on the right. It looks like a megaphone. In this case a bullish reversal.
    3) NDX Apr islands 2020 & 2022. May mud slush. The French election will soon be over, Hot summer is coming : Depleted U all over.
    4) England split with Germany 3:3. France split with US 1:1. Russia 2:0 Ukraine. Who will win FIFA world cup 2022.
    5) US consumers will hunker down. They will not spend a dime.
    6) Oil prices might dive.

  9. Cobalt Programmer says:

    This is just a coincidence. No more bulletins for a while.

    India purchased oil from the tzars, because now siberian oil so cheap. The amount of oil purchased was so low because, the infrastructure to buy more oil is not there.

    State of Maryland proposed a state gas tax holiday but now it got expired. So now gasoline will be >$4.

    Consumers are spending normally or at-least where ever I go. My understanding is simple. Gas prices will no go down until the next recession.

    • Swamp Creature says:

      In Maryland, my favorite Liberty Gas station just went up to $4.89/gallon after they took off the gas tax waver. Time to break out my bike.

      • Flea says:

        Maybe people will get more health benifits,ride a bike,eat less because inflation is destroying America as we know it ,u think China shuts down there country ,for Covid ,hell no it’s to keep supply lines disrupted .Half the work twice as much money.US corporations sold their soul to the devil for profit and greed

  10. SocalJimObjects says:

    Summer is almost here, and people are tired of being cooped up. No matter what, a lot of people will be driving this summer for their summer vacations.

    • PenniesToTheDollar says:

      I am curious how long this cooped up narrative will continue. Eventually there has to be a break even point where the cost outweighs the benefits.

      Long road trips need to factor not only fuel in to the equation but exploding food and lodging as well. I would imagine we are close to that break even point.

      Btw. First time poster. Great comments and smart analysis on this site.

      • Depth Charge says:

        “I am curious how long this cooped up narrative will continue.”

        So am I, since people have not been “cooped up” for over a year.

        • Gattopardo says:

          Same here. I’m fed up with the “Americans are desperate to travel” thing. Come on, people. And worse, the ubiquitous “due to Covid 19” excuses for everything, including city/county employees STILL “working” from home. ENOUGH.

      • Mike G says:

        Lodging seems like a bigger cost factor than fuel on all but the very longest drives. The condo I rent in the mountains every summer went up 30% last year, motel prices everywhere are up substantially.

      • Flea says:

        Welcome

  11. Joe Fracker says:

    This time EVERYTHING is up. So if you put the graph of gas price divided by the cost of a house it would show a huge decline. Now, logically consumers should see stretched pockets but I think they will actually shrug it off a bit and just say “everything is high”.

    People may cut back on day to day things, but I still see leisure travel this summer being high. For many they have been cooped up for 2 years so thiz is their “treat” and they are going no matter what. Actually its not much compared to hotel prices in the grand scheme of things.

    • Depth Charge says:

      “Now, logically consumers should see stretched pockets but I think they will actually shrug it off a bit and just say “everything is high”.”

      You can’t “shrug off” being broke. When the money’s gone, it’s gone. As it is, credit card spending has started rocketing up. We’re reaching the end of this everything mania.

  12. historicus says:

    Throwing the additional costs of inflation onto the credit card.

    Watch for April consumer debt to sky rocket past pre Covid levels….

    • historicus says:

      “First-quarter spending was up 23% on Citigroup Inc. credit cards compared with a year ago. Spending rose 29% on JPMorgan Chase & Co. cards and 33% on Wells Fargo & Co. cards. …
      At JPMorgan, spending totaled $236.4 billion, 37% higher than in the
      first quarter of 2019 and up 59% from its 2020 nadir………
      On Chase cards, travel and dining spending rose 64% in the first quarter.”

      WSJ 4/18/2022

      Consumer debt likely to jump way past pre COVID levels to record levels due to first quarter spending habits.

  13. John H. says:

    Wolf-

    Thanks for the honesty and realism of this statement:

    “Clearly, there has been some demand destruction, and perhaps this was enough to cause the price of gasoline to come back down a little. But maybe it wasn’t. Maybe this demand destruction wasn’t the cause of the decline in gasoline prices.”

    To me, that sums up the reality of economics.

    It also hints at the futility of command economies and central banking.

  14. John H. says:

    I should have said “one of the realities of economics.”

  15. Wolfbay says:

    saw an estimate that draining the strategic petroleum reserve will lower gas prices about 10 cents a gallon and allowing 15% ethanol another 10 cents a gallon. Probably short sighted but people will welcome it.

    • Shiloh1 says:

      Website pure-gas ‘dot’ org shows gas stations selling gasoline not contaminated by ethanol. No offense to the ‘honorable’ Chuck Grassley intended.

      C2H5OH

      C8H18

      BTUs – chem eng and physics

      Corrosiveness properties of each on plastic and rubber.

      ‘Discus’’ (as they say on Let’s Run blog)

      • Dan Romig says:

        BTU per gallon:
        pure ethanol = 84,600
        regular gas = 125,000
        premium gas =131,200
        E10 = 120,900
        E85 = 90,660

        But ethanol has a higher heat of vaporization than gasoline.
        ethanol = 918.6 kJ/kg (kiloJoule per kilogram)
        RBOB (87.5 octane) = 359 kJ/kg

        What that means is that when you use high percentage of ethanol, it cools the air-fuel mixture, and you can therefore get more power out of the engine. But you need to use more liquid fuel, and specific ‘engine mapping’ changes are needed.

        As I’ve commented, my neighbor who is a tech at Penske’s BMW dealership (as is one of his two brothers also) has a 2008 335i that’s been modified. With a 60% ethanol blend, it puts out 600 hp! He’s got a remote control device to alter the engine mapping based on what fuel he is using.

        “It only puts out 500 with regular high-octane, but it’s better for city driving that way.”

        Ask the Mercedes Formula 1 team how this year’s switch to E10 is working for them, and how it’s working for the other teams running Mercedes power units.

        -DanBob, student of physics, motorhead and adrenaline junkie.

        • historicus says:

          I thought ethanol in higher concentrations was tougher on engine parts….

          And if that is the case, the Green Energy like the idea…..just like emptying out the SPR …

        • Wolf Richter says:

          historicus,

          Alcohols, such as ethanol, differ from gasoline and diesel in that they also contain oxygen, in addition to hydrogen and carbon. To my understanding, with oxygen in the fuel, metals are then subject to oxidation, which is not the case with gasoline or diesel. This poses some special problems for fuel systems (made out of metals). But modern systems routinely handle 10% alcohol without problems. When you increase the percentage of alcohol, the problems increase.

        • 91B20 1stCav (AUS) says:

          …and Champ/CART/Indycars have run alcohol fuel for decades, now, for multiple reasons (engine component life not being one of them…).

          may we all find a better day.

    • Augustus Frost says:

      As an estimate only, google search indicates strategic reserve at 593MM barrels as of December 4. Daily usage in 2021 slightly below 20MM.

      Using a strategic reserve to lower the gas price a few cents per gallon is just plain dumb, but then I wouldn’t expect anything else from American “leadership”. Americans (meaning us the peasants) are being asked to make a sacrifice for a country most Americans couldn’t even find on the map before February 24th.

      The sacrifice is actually for the Empire. No thanks.

      It can temporarily reduce the price or reduce it at the margin but if supply is reduced for any period of time (read Russia represents about 7% of US volume), anyone can do the math.

      • Khowdung Flunghi says:

        “anyone can do the math.”. No, they can’t… that’s the problem.

      • Depth Charge says:

        It has become painfully obvious to everyone except the dullest of the dull that we have a billionaire oligarchy with a stranglehold on the US government, using it to serve their own corporate and personal financial interests (greed). If you have billions, you get a seat at the table. Money talks. If you don’t have it, you’re nothing.

      • historicus says:

        Why isnt the military calling caution to the emptying out of the SPR?
        Are these the same folks that were gonna call China and let them know we were conducting military operations in opposition to them?

      • Wolfbay says:

        They are also diverting a lot more corn to ethanol with possible food shortages coming up.

        • Charlie says:

          Wolfbay, just wanted to put your comment in context since I have been in the ag industry for over 50 years. Ethanol use has grown since the industry got going around 2006-2007. But the corn production pie has also grown from around 10 billion bushels at that time to over 15 billion bushels last year, which interestingly, this is how much ethanol use has also grown. And we still have enough to feed livestock and to export and keep the carryout stable. HOWEVER, corn planted acres are estimated for this year at 89.5 million vs 93.4 million last year. That’s not good and the corn market has already anticipated this moving from $5/bu last fall to over $8 this spring. Throw in a potential drought and fireworks may just be beginning.

  16. Gilbert says:

    Here in rural New England gas has always been more expensive than the cities. Now, for the first time ever, it is the exact opposite with prices nearby about $3.85 and in the closest city (80 miles away) over $4.

    • Implicit says:

      The Berkshires! Could move out that way, if things get too oppressive around Boston way.

  17. andy says:

    Russia might get serious with EU gas if poked hard enough. Already installed quasi gold backed ruble.

    EU gas prices double – again.

    Iran/Russia/China will do petro deals outside petrodollar

    Combo hyperinflation and rising energy costs in US could see $10-15/gal gas in US.

    Be interesting to watch.

    • Khowdung Flunghi says:

      I always find it interesting to compare current prices to the equivalent in pre-1964 silver coinage. The silver content value of a pre-1964 US quarter is currently $4.64, per coinflation website. Depends on the local market, but that’s not far off from the cost of a gallon on unleaded. What’s changed? The value of “money” – that whole “store of value” thing…

      Want a US $20 gold coin? Bring 110 US $20 bills…

    • Augustus Frost says:

      The US has declared close to total economic war on Russia. To date, they have not reciprocated.

      If I were them, I’d sell any key commodities the US previously bought to China for stockpiling.

      If anyone thinks supply chains are strained now, just wait and see what it looks like if they do something like it.

    • sunny129 says:

      andy

      ‘quasi gold backed ruble’
      ???
      Could you explain, backed with facts or links?

      Thank you.

  18. Here it comes says:

    The analysis charts I trust show oil still having much higher to go. The spike we had last month was extended, but the pullback we are seeing now is just typical wave action.

    $150/barrel is definitely in the cards, with prices much higher than that being a real possibility over the next year or two.

    • Depth Charge says:

      The higher oil/fuel prices go, the less I am willing to pay for a new vehicle. With a diesel price of $7+ per gallon, I expect 35%+ off of msrp to account. Ditto RVs which require the burning of mass fuel.

  19. Michael Engel says:

    !) Gasoline consumption trend was up until 2019.
    2) Draw an uptrend line from Oct 2011 low to 2013 low and a parallel
    from 2012 high.
    3) 2021 high entered mid channel and plunged..
    4) 2021 low, the last low, is equal to 2016 low.
    5) 2019 high > 2021 high. 2021 a lower high.
    6) Apr 2022 high will test the uptrend channel from below in mid summer. How far it will go we don’t know.
    7) The largest thrust was from Mar 2020 low.
    8) Gasoline consumption is shortening it’s thrust.
    9) In the fall, beyond consumption peak, – possibly with deteriorating
    exogenous causes, – 2023 consumption might test 2020 low, in order to pay for higher Natgas rent, food, c/c….

  20. MiTurn says:

    “This is unusual this time of the year, when gasoline consumption normally rises through the summer.”

    I’m curious to see if the highways and byways will be clogged with all of those sparkly new RVs that are making record sales. Many might end up parked in the driveway and being used as mini-guest rooms for visitors.

    I’ve learned one things recently due to a family visitor this past week. Amtrak is busy and fully booked, at least here in the Northwest. My sister-in-laws visit got extended three days because no ticket were available. Is this related to high gas prices?

    • Marcus1 says:

      Notably, the RV sites that are usually impossible to book have plenty of openings this year.

  21. Michael Engel says:

    10) CRAK, Oil Refiners ETF, doing nothing since June 2021, for almost a year.

  22. Crush the Peasants! says:

    Mr. Fusion, take me away!

    • SnakeEater says:

      I miss the days in the 80s when you could just pour a half drank beer, a banana, and an empty egg carton into the tank and then just hover off into the distance. This future sucks.

  23. COWG says:

    Gasoline prices are not high enough for people to really change their habits…

    I just completed a 1500 mile round trip (I75 & I10) and compared cost for the exact same trip at the exact same gas stations and the cost was $50 (premium) more compared to last December…

    Avg speed in the right lane where I drive was around 70mph…. Avg speed in the left lane was around 85….

    The stratification of incomes will determine the pain of fuel prices felt by the populace…

    For a lot of these folks, they just don’t give a damn about fuel costs because in aggregate for a 20 hour round trip to the beach and back, a hundred dollar increase in fuel cost means nothing…

    However, change availability, and let the screaming begin…

    I did see $3.89 (reg) , so since season is over here in SWFL, so less demand might reduce prices…

    Gas prices don’t even make the news anymore down here…

  24. Michael Engel says:

    11) If gasoline consumption will be about equal to 2019 high, with double the prices, the unlimited spending will come to it’s end.

  25. Bobbyboo says:

    Our travel times for shopping and leisure are being lowered, not to so much the price, more determined to reduce our footprint. We have had a hybrid since 2007, enjoy the independence and less maintenance on the Chevy Malibu. G.M. is in their last year of Malibu production, the hybrid died of no consumer demand in 2019, I believe. Averaging 40 m.p.g. I’m wondering how the talks between Venezuela and the U.S. and E.U. are progressing, our last President set a embargo on Venezuelan oil a few years back, socialist rule in Our part of the World is a political no-no .

  26. RedRaider says:

    Since price is proportional to demand divided by supply, demand destruction would decrease price. So too would an increase in supply. Isn’t this a real possibility in the aftermath of covid?

    Since ICE cars use gas and EV cars do not, the more we move to EV the less gas we need. But gas is a product of the crude oil distillation process. In a world of EV cars doesn’t gas become a waste product of the distillation process? Gas changes from being a profit center to a cost center. The price of all other distillates will have to increase to fund disposal of this new waste product. And since gas is about 45% of a barrel of crude oil that’s a lot of waste product.

    Can gas be further distilled into other products?

    Are there other uses for gas than ICE cars?

    • COWG says:

      “ Are there other uses for gas than ICE cars?”

      Entertainment….

      You ever watch a Redneck try to light a grill using gasoline ?

      • roddy6667 says:

        I watched a guy light a grill with flammable insecticide. I took a hard pass on the burgers.

    • Anthony A. says:

      “Are there other uses for gas than ICE cars?”

      I use it in my lawnmower and to pour on weeds to kill them.

  27. Phil says:

    Lots of places around here in CT with $3.65 gas… not really that remarkable. I would say our behavior has changed enough to offset the loss of Russian oil on the market- that is to say, not very much. We take the smaller car when it’s not too inconvenient to do so. Work from home and hybrid work from home is still widespread here, so traffic may be slightly down, however the roads feel quite busy in general. Highway speeds are 5-10 mph higher than before the pandemic, because traffic stops have for the most part completely disappeared.

    • Central Florida says:

      Your description of CT aligns with my current experience down here in Central Florida.

      Traffic speeds have nudged up a bit now that the traffic jams are slightly less bad. I have stopped driving the F150 for the most part and take out our smaller SUV. I also try to adjust some driving habits by paying more attention to how I accelerate/ brake.

  28. Brant Lee says:

    These fuel prices of course hit the lower income folks very hard. Especially if there is a long commute to work.

    I think Wolf is right, higher fuel prices fluctuating at higher levels are here to stay. And just another excuse for corporations to inflate prices even higher, higher than they should be.

    But the online delivery wars continue despite fuel prices. I made a $60 order from Walmart, and unbelievably, the order came in five different deliveries. The first day, a Walmart employee dropped off a few items in his own vehicle, I live 15 miles from the store. The next day, FedEx came twice with some items. The next day a FedEx delivery. The next day FedEx delivered a 12 x 16 x 8 box with a pack of 99-cent fish hooks. The world is mad.

    • Shiloh1 says:

      Doesn’t have to make sense.

      Wally World and Bezo are all about putting the little guys out of business.

    • Gilbert says:

      How car Walmart turn a profit paying $15/hr (plus benefits) to associates who shop for customers? And then the groceries are brought out to customer vehicles. Doesn’t add up.

      • El Katz says:

        G:

        Many of the shoppers you see in the stores work for companies like Instacart. People use their app to order groceries, etc., and Instacart takes it from there. In some areas (metros) you can get delivery to your door…. out here in the stix you have to fetch for yourself.

        • Depth Charge says:

          I was at a Safeway a few years ago, and there was one of those delivery drivers communicating with a customer by cell phone while in the ice cream isle, telling him they were out of the flavor he wanted. She was telling him what was available. She was a young woman and had a friend with her. She made the call and identified herself which is what piqued my interest.

          The thing I found odd was that she had no other groceries. It appeared that she was simply buying him one pint of ice cream and delivering it to him. I laughed to myself at the absurdity. Since when did people become so rich that they can afford to have everything delivered for an extra fee – groceries, restaurant food, etc.? I think a lot of this is going away, and quickly.

        • Augustus Frost says:

          “Since when did people become so rich that they can afford to have everything delivered for an extra fee – groceries, restaurant food, etc.? I think a lot of this is going away, and quickly.”

          The end of the mania will kill it off almost entirely.

          Reminds me of Webvan who were ahead of their time. No, not their business model which equally stunk just as much, but the ability to raise funding and incinerate their “investors” cash.

          Longer term, I can see it being feasible in a few of the highest density US cities and maybe in the very low proportion of the most affluent zip codes but that’s it.

          Once the mania ends, most Americans are going to be far too poor to waste money like that and the economics don’t add up as a business.

    • El Katz says:

      Not everything sold on the Walmart website is sold or distributed by Walmart. Look at the listings carefully and you’ll see disclosures such as “sold and distributed by” even though you think it’s Walrusmart.

      The inventories of goods you order from the jungle website are not always at the same distribution center. We find that stuff distributed by Amazon may come from warehouses all over the country, hence the multiple boxes.

  29. Softtail Rider says:

    In the beginning of the industrial rise gasoline was a waste byproduct of crude. Then the automobile came along and found a use for the product. Diesel also was only used as a heating fuel till the jet engine came about. Afterwards truckers discovered a diesel engine was more powerful so they began to use it rather than gasoline. Now the oil/chemical companies have discovered many more uses for crude other than gasoline, diesel, and jet fuel. I haven’t the capability to prove what I’m writing as most is from memory and working in the industry for 30+ years. In the future gasoline may again become just a by product and cheaper to dispose to the driving public. This is one of the reasons for canceling an order on a new Ford diesel pickup. I also own high milage motorcycles as they are more fun to ride.

    • Dan Romig says:

      Diesel does have the edge on gasoline in BTU per gallon at 147,000.

      But it also has the ability to be burned at varied stoichiometric ratios. So when a diesel truck is rolling down the highway, its throttle bodies are open, and therefore the intake stroke of the engine is not working against as much of a vacuum as a gasoline engine is.

      A gas engine rolling down the highway needs the same fuel/air mixture ratio; typically 14.7 to 1. But now, the throttle body is restricting the flow of air into the cylinder on the intake stroke. Not as efficient when cruising along than a diesel engine is for this reason.

      • COWG says:

        Dan,

        Interesting…

        Is the BTU a reason diesels are preferred when torque is needed? Or is it just the nature of engine that lends itself to creating torque through gearing?

        Also, is the throttle body restriction the reason BMW ( and now others) have gone to VVT ( variable valve technology) ?

        My ‘ 06 E65 N62 states that the throttle body is not used except if you have a failure of VVT, then it reverts….

        • Dan Romig says:

          COWG,

          Engine configuration plays a big part of it for torque. Bore vs stroke gives insight into things. A “square engine” with the distance a piston moves being the same as the diameter of the piston typically gives good torque, but not tons of power.

          When the stroke distance is reduced and piston diameter is increased as it is in racing engines, power will increase and torque will decrease. The valves can be bigger in this way too, and it lets more fuel/air in and more exhaust out flow as a result. Plus the shorter the distance the pistons move, the faster the engine spins until hitting redline.

          Think of torque as how much “push” the pistons do; longer stroke = more push. Think of power as how fast the crankshaft spins; shorter stroke & wider pistons = more power.

          VVT is technology to control when, and for how long the valves are at work to help the engine breathe in and out. But that’s not all of the story. Ignition timing, or spark plug timing is also critical to get the most efficient combustion and to avoid knocking.

          More than that info is kind of above my pay grade. It is quite the science to get the most performance, efficiency and durability out of all that goes into an engine. Again, ask the race engineers at the Mercedes F 1 headquarters about this.

          P.S. My older Kawi inline 4 cylinder 1.2 liter motorbike has great low end torque and is nice to drive in the city (meaning slow). My new Aprilia 1.1 liter V4 has a touch less torque, but lots more power, and because it’s a V4, it’s smooth as silk.

          Technically advanced? The bike that’s replaced my 2019 Aprilia has rider adjustable, computer controlled engine braking. Let go of the throttle, and you can pre-set how much or how little you want the engine to work slowing you down. Cool, eh?

        • Dan Romig says:

          And the throttle bodies works with the fuel injectors. Step on the gas = more fuel. But for gasoline engines this means more air too. So the throttle bodies open and close with a computer controlling everything so that the fuel/air ratio stays the same. Quite a few variables at play.

          Old school had carbs. Step on the gas = throttle body open = more air. More air pulls more fuel into the engine from the carbs. Adjust the carbs to get the right combo was how it used to work.

          Mercedes used fuel injection in the ME 109 fighter planes in the late ’30s. Rolls Royce used carbs in the Spitfire, but they had Reynolds 531 double-butted tube steel. ME 109s used straight gage 4130.

          I used to race with custom made steel bikes using 531. But I’ve made all my furniture with 4130 and maple wood. Oh, sorry, I’ll stop now …

        • Depth Charge says:

          Dan-

          You forgot to include compression ratio. Gas engines are running between 8:1 and 11:1, generally speaking. Diesel engines are between 15:1 and 18:1 which allows for a longer stroke and a hotter burn. Gas engines are limited because they start knocking (detonation) at higher compression ratios since they actually compress the fuel, which will lead to engine failure. Diesel engines are compressing air then injecting the fuel into that heated air, which not only produces more torque but leads to greater thermal efficiency and mileage.

          We are now seeing more direct injection gas motors like the Ford Ecoboost which allow for higher compression, better mileage and more torque as the high pressure fuel pumps deliver more precise measurements leading to cleaner, more complete burns. Those high pressure fuel pumps are still only delivering about 2,200 psi fuel rail pressure whereas their diesel counterparts are over 35,000 psi. Diesel has a huge advantage due to more BTUs and higher combustion temps.

        • Dan Romig says:

          Thank you Depth Charge.

          Once again, “Learn something new every day @ Wolf Street.”

        • Depth Charge says:

          “Thank you Depth Charge.”

          I wasn’t correcting you, just adding to the good info you already provided.

        • Dan Romig says:

          Yes, I was being quite sincere.

          Compression ratios are quire important to getting out power. That’s where having high octane gasoline allows you the higher compression and better power output per displacement of the engine. That much I certainly have in the hard drive between my ears.

          The part about diesel engine compression rates and the fuel injection timing at such high psi fuel rail feeds going to the injectors was not yet entered into my hard drive. But it certainly is now, and I do thank you again.

        • COWG says:

          Thanks to you both …

  30. SOL says:

    I read an article last year that stated gas prices are highest in countries that have “green” policies. It’s intensional and steers citizens toward alternatives.
    Also just saw on Bloomberg that Biden is making it harder for US to produce by limiting land available for tapping.

    In short, I think high gas prices are part of the current administrations plan. Not that I want to sound biased.

    • Wolf Richter says:

      Gas prices are highest in countries with the biggest taxes on gasoline.

      • 91B20 1stCav (AUS) says:

        Wolf-i know it’s been brought up here, before, but i’m still trying to parse folks’ mental struggles between ‘capitalism’ and ‘socialism’ when applied to fuel pricing, or the application of supply&demand, in general. Is it a developed ‘entitlement’ mentality on a relative longterm stability of consumer pricing of goods&services? If so, should certain commodities then enter the realm of ‘public utility’ with attendant price controls? (see ‘ox, who’s is being gored’, ‘free’ markets, ‘well-regulated’ markets, oligopoly, monopoly’…).

        may we all find a better day.

  31. james wordsworth says:

    The unspoken real pain will be felt by developing economies that are fuel importers. Balance of payments will blow out causing all kinds of disruptions. (3rd world debt crisis again)

    China and Covid – it ain’t nearly over yet. Another potential big hit to demand.

    It is not all USA focused.

    • Flea says:

      Don’t forget India

    • buda atum says:

      “The unspoken real pain will be felt by developing economies that are fuel importers.”

      Nigeria, to name one, though some will quibble about the “developing”. We’d be demonstrating by now, but our president postponed a ban on subsidies (importers threatened with bad fuel and we citizens love our lunch subsidised even though it reduces availability).

      The government pays billions in subsidies to gasoline importers despite us being a crude oil exporter, so what we may gain on the swing is lost on the merry-go-round. Gas is a mere $1.55 a gallon, but at 557.38 Nigerian Naira to the dollar, and minimum wage at 30,000 Naira a month, every cent hurts more.

      Got to say, we have a messiah on the way. Dangote is building a refinery!

  32. Flea says:

    Wolf you have best site on internet,if Twitter,Facebook, followed your lead with truthhonest ,and only edit violence .If they followed your rules the world could be a better place,.

  33. Another Scott says:

    I try to look at the local Dunkin’s as a barometer for vehicle traffic. There doesn’t seem to be much of a change in the amount of people in line, including those who are stopping traffic in order to get into the drive-through lane. The increase prices don’t seem to have made enough of an impact to change their behaviors, until they do, I’ll be skeptical about demand destruction.

  34. unamused says:

    “a long-drawn-out zigzag higher”

    Because prices never go into orbit in a straight line.

    Most of the costs of petroleum products are externalized and deferred, but those costs have started showing up in recent years and will eventually become unpayable.

    Mad Max gets his petrol for free, when he can get it at all. So much of the future has been plundered to feed the past and present that there really isn’t all that much left.

    • 91B20 1stCav (AUS) says:

      una-the light in your last pp is waay too blinding for many to look at…

      may we all find a better day.

  35. GSH says:

    We drove from the PNW to AZ in early January and back a couple of weeks ago. Our Jeep Wrangler Unlimited gets about 20mpg at 65/70mph. Fuel costs going down were $320 coming back $440. LA had the absolute highest prices at $6.50 for regular.

    Diesel prices have gone through the roof (at least here on the West Coast) directly impacting transportation costs for all goods. This will further feed the inflation spiral in the coming months.

    Truckers are planning ahead to avoid filling up in CA. They can easily save $1 to $1.50 per gallon by filling up in AZ and OR. I do the same when we take our 208 gal diesel powered RV.

  36. Birdogg says:

    Pandemic related supply and demand shocks dovetailed to the V-recovery has created a broken economic system.

    Thankfully, instead of a depression, we’ve ended up with bottleneck inflation dynamics, but at the same time, employment rapidly increased, compounding bottlenecks.

    The Ukraine invasion and global oil shortage adds inflation pressure, but it seems like the whipsawing volatility through the pandemic period has been a series of shock waves that are being increasingly ignored, which sets up the current confusion in markets. It’s as if people are experiencing PTSD, deer in headlights. Thus demand destruction isn’t as likely, because they’ll be a cat and mouse back and forth uncertainty which will almost buy time for stuff to fall back into equilibrium.

    However, it seems the media is tuning out a fed rate increase of 75+ bps in a few weeks. That’ll apparently be a shock, which may feed demand destruction. If people shrug that off and yields climb with stocks, we’ll probably see a vicious recession, after a horrific stock market crash.

  37. fred flintstone says:

    As Wolfe points out EV’s distort gas sales and since they are a small number not so much right now…..but growing quickly. 4.5% of new car sales last quarter were EV.
    A big one is the retiring baby boom and stay at home jobs. I used to drive over 46 miles a day to and from work……as a retiree……46 miles every three weeks. Both my sons work from home at executive jobs.
    Will the price go up…….its pretty obvious that there is a huge force pushing them higher……. expect to see some refinery fires over the summer…….a few few missile strikes in the mideast…….a pipeline or two rupture.
    Yes, I’am a suspicious old man.

    • Depth Charge says:

      “A big one is the retiring baby boom and stay at home jobs. I used to drive over 46 miles a day to and from work……as a retiree……46 miles every three weeks. Both my sons work from home at executive jobs.”

      Yet another anecdote to how the poor and working classes are shouldering most of the burden, getting screwed 6 ways to Sunday. They cannot work from home or just decide not to drive, as they do the shiddy jobs which require a human at the end of a broom, a trash can, a register, etc.

  38. Brent says:

    “$20 Per Gallon: How the Inevitable Rise in the Price of Gasoline Will Change Our Lives for the Better”
    ( published July 15, 2009, still selling on Amazon, written by Christopher Steiner, Senior Staff Reporter at Forbes magazine )

    Modern day Nostradamuses, Prophets, Forecasters, Tasseographers (tea leaves readers), holders of PhD Degrees in Quantitative Economic Divination & Applied Occult Sciences – F… y’all !!!

    • unamused says:

      Tasseography is very reliable, which is why research has developed numerous other ways to foretell the future.

      alectryomancy: divination by watching a rooster gather corn kernels
      ambulomancy: divination by taking a walk
      apantomancy: divination using objects at hand
      brontomancy: divination using thunder
      cromnyomancy: divination using onions
      gyromancy: divination by falling from dizziness
      narcomancy: divination using sleep
      stolisomancy: divination by observing how one dresses oneself

      I just go by what works. Arithmancy is divination using numbers. Personal favorite.

      • COWG says:

        Electromancy : divination after getting struck by lightning and realizing you don’t have to worry about the future anymore…

        :)

        • Brent says:

          Dowsing ! I forgot dowsing –

          Thats what Uncle Jerome is doing, wandering around with dowsing rod, 25bp up, stocks & RE crash, 25bp down, inflation 18% up, no good, let’s try again – to the tune of Lost Pointer Sister Lael Brainard singing “Slow Hand”

          “I’m tired of fast moves
          I’ve got a slow groove
          On my mind
          I want a man with a slow hand
          I want a lover with an easy touch
          I want somebody who will spend some time
          Not come and go in a heated rush”

          F. them too…

        • unamused says:

          Ten thousand comedians are out of work and you’re trying to be funny.

        • 91B20 1stCav (AUS) says:

          fancyschmancy-the always-fungible predictive power of jargon-word salads!

          may we all find a better day.

      • LK says:

        Arithimancy is now how I will refer to mathematics going forward.

    • Depth Charge says:

      “$20 per gallon”

      I don’t think prices could even make it to $20 per gallon before you saw such a horrific economic meltdown that there was a glut of fuel at the stations with no buyers. The economy would go into a grand mal seizure. $20 per gallon is laughable even in Weimar Boy Powell world.

  39. Rory Vanucchi says:

    good work Wolf

    I tend to agree with your thesis of oil and gas drifting higher at least through the summer driving season.

    Once we get into autumn I’m expecting a slowing economy with the persistent cost of living inflation, so imagine consumers will cut back on driving, and we get some correction. Current geopolitical divisions are deteriorating globally, and that of course will keep prices higher than normal.

  40. Anthony A. says:

    I just got back from taking my daughter and her husband to Pier 21 in Galveston to take their “honeymoon” cruise that has been postponed by Covid for the last 2+ years. My trip was essentially down I-45 from the north side of Houston, Texas to Galveston Island and back. The drive was roughly 180 miles round trip, all freeway (mostly 8 lane type).

    We left today (Sunday morning) around 10:00 am (Easter) when the freeways should have been “light” as no one was at work, commuting, shopping, or out looking for a job. Jails in Houston should be full from last nights “action” and Cops all in church, well, the ones that were not shot last night anyway.

    The freaking 8 lane highway (speed limit 65 – 70) was full of cars and in some areas, stop and go for a few miles. This was just like the middle of the week on the freeways. It took me 4 hours to make the trip with no stops except to drop the kids off at the boat which took all of 54 seconds.

    Oh, I did see one Tesla on the drive. Otherwise, it was all Big Trucks (pickups), SUV’s and a lot of beat to death old four door Altimas and Hondas driven by the working class, probably going out for a late breakfast at the Waffle house or Denny’s.

    87 octane around here is averaging $3.79/gal and it has not dropped significantly after the Gov announced the SPR release, which really won’t affect much as that oil won’t be sold into the worldwide marketplace for several months.

    Happy Easter everybody!

  41. Michael Engel says:

    1) There are 8 billions people in the world. There are not enough
    commodities to feed them, keep them warm and moving.
    2) We got all the right stuff, including the most important rare earth,
    that are dumped as toxic radioactive byproducts. We are blessed.
    3) We cannot transmit natgas to Europe and they cannot receive it.
    4) China is tumbling under RE collapse.
    5) We are getting an influx of millions black market workers.
    6) If we will stop the infantile backwardations, sacrifice some for what
    is more important, we will be all right.
    7) All we have to do is grow up as people, as a nation, stop arguing, fighting … stop the warmongers, stay away from troubles, just let go.

  42. Harrold says:

    Wolf, you’re the car expert here. How long before we see the usual buyers strike for trucks and big SUVs, along with people leaving them at home? Or is the price of gas not high enough yet?

    • Wolf Richter says:

      Hahaha, no, I’m not the expert in seeing the future. But this one will be interesting to see. This time, there is an alternative: EVs. Those 600hp electric trucks have huge long waiting lists, but volume production isn’t happening yet. For right now, new vehicle inventories are still desperately short.

      • Anthony A. says:

        Today’s daytime trip to Galveston and back to The Woodlands indicated lots of car lots were brimming with used iron. Really a lot of big vehicle inventory showing; trucks, SUVs.

        Come to think about it, that’s really what sells around here.

      • JeffD says:

        I’d love to see one of those EV trucks pull a load up the grade outside of Kingman, Arizona. Full charge at the bottom, empty at the top. It would probably overheat the battery.

        • Wolf Richter says:

          Nah. Nonsense. But just to get you thinking: the electric truck recharges the batteries on the way down through regenerative braking; an ICE truck’s brakes just get hot (lots of waste heat).

          BTW, I always find it utterly ridiculous when someone uses a special use that only a minuscule number of owners are actually doing (towing heavy loads up a long mountain grade), in an effort to diss the ultimate mass product — pickups being the best-selling models in the US of all times, period. Nothing comes even close. Relatively speaking, of the many millions of pickups out there on the road, only a very small number of people use them to tow anything, and even fewer ever tow anything up a long steep mountain grade.

          BTW, Donner Pass (I-80) in California has a similar elevation as the I-40 pass you mentioned, and folks in CA can’t wait to get their electric 600hp pickups.

        • Dan Romig says:

          Limagrain Cereal Seeds bought out my family’s wheat seed genetics company in 2010. Part of the buyout was for Dad and me to stay with LCS for one year after the sale; so I was working for them in 2011. We used Yuma, Arizona as our off-season nursery location to get two generations of spring wheat per year in the northern hemisphere. Late April is when harvest time happens in Yuma.

          LCS has their USA headquarters in Ft. Collins, Colorado. They’d bought a 2011GMC HD 2500 with a Duramax 6.6 liter turbo diesel with an Allison 6-speed automatic transmission to do their transportation work. Needless to say, there are a few mountain passes to go through on the trip back to Ft. Collins. Plus, there’s a trailer, a combine tied down on the trailer, and a truck bed of seed to add to the weight.

          The Allison has a “transmission output retarder” that helps slow down on descending by using a vaned flywheel in the transmission housing to absorb the truck’s energy through the drive shaft. This energy is converted to heat and dissipated through the truck’s cooling systems. It works at high drive shaft RPM — independent of engine speed or what gear the transmission is in.

          Any way you do it, heat will be created. But it’s good use of technology to take some of the heat away without using the brakes, and using the transmission, eh?

          However, turning that heat back into electric energy, and using it, is by far a better way to do it.

        • Dan Romig says:

          … turning kinetic energy into electric energy …

  43. Augusto says:

    Mid to long term gas prices are going higher. I live in Alberta, the oil producing capital of Canada. Only the small and medium sized oil companies are doing any drilling and mostly infill wells and small plays. No large capital investment being made because of fear of new carbon taxes or regulation, or I suppose if you believe oil is on its way out and alternatives around the corner…but personally I think they are a mirage, like visions of an oasis on the horizon in a desert. So with worldwide demand increasing and high depletion rates in most producing fields, oil prices will only go higher. Switching to natural gas helps, but this switch is putting upward pressure on Nat Gas prices. Usage reductions in North America are more than offset by increased consumption in the rest of the world…everyone wants a car…or two…

    • Harrold says:

      I believe EVs are a fad that will max out before 50% adoption. They are okay in cities as a second commuter car. The way most families now have a truck/suv for fun and an economical sedan for commuting. I just don’t see them as practical enough until battery charging is fast, and I don’t think that technology is coming any time soon (despite tons of hype).

      I’ll probably get some down votes for this next comment. I don’t think the US electrical grid is in any shape to take the extra capacity. Let’s see what happens when EVs hit 10-20% adoption. Let’s see if it’s really easy to install high amp chargers everywhere. I won’t be surprised if the sorry state of infrastructure makes that a bigger deal than advertised. Anecdotes about how difficult it is to get service installed abound.h

      • rick m says:

        Harrold- Agree with the domestic electrical grid being unequal to the task at present. But the electric utilities don’t get paid unless the meter spins, so they’ll make it happen upstream of the meter. Downstream There’s going to be a lot of retrofitting of existing home and business electrical systems by electricians who are already in short supply themselves and who are encountering lead times on standard stock items. I don’t start jobs now until I have everything I need on hand. Smaller municipalities and rural jurisdictions nowadays are throwing up more roadblocks to grab money from anybody that wants to build anything in their catchment zone. Inspectors now are supposed to check all the trades, rarely do they understand what they’re looking at if it’s not what they started with back when each trade had it’s own inspector. It’s really liability they’re scared of. So everything they don’t understand gets red-tagged. Or for the reinspect fee. They don’t know from EV chargers, but they’ll be happy to learn on your dime. They might add thousands to the initial cost simply by requiring current Code compliance for grandfathered structures installing a big charger. Not unreasonable, but gratuitous if there’s nothing wrong or overloaded. And they all have their favorite contractors. Building/Planning departments in some towns have well-deserved evil reputations. If government money ever gets involved in paying this tab, as it will, tens of thousands per car charger in many cases. Between this official obstruction and materials, a lot of contractors I know are hanging it up for good. Between the judgement-proof handy guy in a van, and a big government work subcontractor, the room for starting your own service business and not going broke is getting very narrow. With backlogged electrical service companies, cars may wait a little while on their chargers. Given present technology.
        Present technology isn’t a given, however. I’ll be shocked (electrician humor) if processes in manufacturing, chemistry, and especially energy management of the battery as repository/motor as converter in the new vehicles aren’t so highly engineered as to make the electrical loads on the grid turn out to be not as bad as they look right now. Our host has written about regenerative braking. Realistically, people are going to demand a workable, convenient electric car that isn’t going to require a significant change in how they live every day. And somebody’s going to sell it to them. I think EV’s are going to turn out to be a blast to drive, they’re not going to New-Coke the American driver with tedious, maladroit subsistence vehicles if they want to keep their necks and their stock options and director’s fees in the boardrooms. But I’m like the old gray horse who said it’s the carburetor, I don’t know nothing about cars.

    • Kye Goodwin says:

      Augusto, I believe ‘that oil is on its way out’ because its a nonrenewable resource. The global supply seems to have been getting harder to maintain overall since the early aughts. Something close to the current high prices prevailed for 4 years from 2010 to 2014 until fracking in the US brought prices down, by eventually raising world production by around 10%! But now I’m reading that the massive fracking effort, at least in the northern states, is unlikely to reappear because investors have realized that there’s no profit in it.

      I don’t know what to expect. Fracking shale has been so important to the history of oil prices that I find it hard to believe that it was accomplished largely without profits. Will it start up again big time now that the price is up? We’re about to find out. There’s some chance that world oil prices will stay very high from now until we stop using the resource.

  44. Zark Muckerberg says:

    Powell ease the concern with gas by letting out a wet fart

  45. LibDis says:

    In Tampa Fl there is more traffic than ever, and everyone, I mean EVERYONE, even all the ladies, are driving big ass F150s or SUVs.

    This is gonna start to squeeze them good, especially if price takes a another leg up.

  46. ru82 says:

    I don’t quite understand why TIP bonds are crashing.

    I say this because in one of my 401k funds is a fund called Goldman Sachs inflation protection fund and it is down 4.6% since the beginning of 2022. It really is not an inflation protecting fund. LOL It has been going down while inflation is going up. I looked at its holdings and it is all US TIP bonds.

    I then took a look at the TIP ETF. It is down 7% since the peak in November 2021.

    Anybody know why TIPs are dropping when inflation is going up?

    • Double Bluff says:

      I just bought some TIPS based solely on their name. Another idiotic move on my part, apparently.

      • Charlie says:

        To DB: For short term, 1-2 years, 30 year I Bonds are true inflation bonds. Current interest rate 7.12% and resets every 6 months. Interest rate will re-set May 1 at 9.42%. Can only buy 10k per social security number per year, and are bought from Treasury Direct, no commissions. Limited in what you can buy, but not a bad place to park money for short term. Sure beats my 0.81% 13 month credit union rate. Several caveats though, main one must hold for minimum 1 year and if cashed out, forfeit 3 months interest. After 5 years, no interest penalty. Plus, no state tax on interest. Still that reduction in interest is much better than short term CD’s.

        • Nemo 300 BLK says:

          I second the I bonds. I started buying these first of this year for myself and after the May reset, I’m going to buy $10K for my wife.

          The treasury website you buy them on is…well, you can tell it’s run by the government. You can do a one-time purchase or reoccurring purchases, all pulled electronically transferred from your select account.

          Every time you buy a bond, it shows you the 7.12% it was purchased at.

    • John H. says:

      I’ll take a stab, ru82-

      According to Investopedia:
      “The principal value of TIPS rises as inflation rises while the interest payment varies with the adjusted principal value of the bond.”

      And:
      “At maturity, TIPs return the adjusted principal or the original principal, whichever is greater.”

      If you buy an older TIPS security, its principle amount (and consequently its present interest payment) has adjusted upward over the years. You’re possibly also paying a premium.

      Many investors don’t understand that if/when inflation goes in reverse, that their principal on the bond you bought can adjust downwards, back toward the face amount.

      When buying TIPS, you generally are least subject to downward adjustments when you buy at face value or a discount to it, but due to ZIRP, most seasoned TIPS have been inflation-adjusted, and/or are trading at hefty premiums.

      While the annual interest can adjust below the originary amount, the principal repayment cannot be less than face, so you have a floor, BUT, it might be significantly less than what you paid.

      IMO, that creates a situation where investors are more comfortable with short treasuries with a low return (around 2% now) for “safe money” verses an “inflation protected” security with a possibility of loss of principal. (Gold faces a similar comparison to treasuries as rates rise, and gets sold off too, FYI).

      Confusing as hell. The treasury site is somewhat helpful…

      Eager to hear critique from other commenters if any of this is incorrect.

    • Bobber says:

      If the TIPS payout is based on inflation as measured by CPI, maybe it’s recognition that the CPI understates inflation.

      To find a more palatable answer, perhaps we should poll 50 dimwits to see what they think. Isn’t that what the CPI does?

  47. unamused says:

    Meanwhile, costs of photovoltaic and battery technologies have dropped 90% over the last 20 years and are widely expected to continue falling. That’s the good news.

    The bad news is that the world’s transportation, industrial processes, and militaries are built on fossil fuels, and it isn’t remotely possible for these fossil fuel path dependencies to be replaced and obsoleted before climate catastophe does its worst.

    Numerous inscrutably reputable think tanks are deeply persuaded that the collapse of civilization has already begun. They’re looking closely at potatoes not only because you can you survive on them but better yet can use them to make vodka.

    • VintageVNvet says:

      una:
      1. you can use anything that will ferment to make ”vodka” as has been well established in prisons amongst many places where import of alcohol is forbidden or at least restricted.
      2. the idea of ”peak” oil has been touted to us since at least the Barry Commoner book(s) of circa 1970, and always proven wrong; another commenter on here described how his chemical engineering professor explained how the grinding of tectonic plates produced oil, a rational explanation for the gazillions of tons of oil already extracted, with tons more constantly arriving back to old and previously emptied wells.
      3. the current propaganda re oil, collapse of society, etc., etc., is just that, intended to create fear and division and ultimately lead to more GUV MINT control of our individual lives as GUV MINT once again seeks total hegemony.
      4. current developments in theoretical physics indicate we are closing on usage of gravity and only gravity as permanent and permanently ON energy source, and it will be all that is needed.
      5. yes, too many people, and Gaia is working on that one as should we all
      6. glad to see you back on WolfStreet; thought you were someone else at first, but you now back to great form

      • Anthony A. says:

        VVN, with your numbers, you are starting to sound like M.E. Whats with this gravity and Gaia stuff? I thought you were an old cement/plywood kind of guy.

        Tectonic plates shifting….?, you didn’t really believe that from some old college professor, did you? Filling old wells (no one has ever drilled a well that deep).

        • Softtail Rider says:

          Being a rabble rouser I can’t defend any comment but have always wondered why gravity has not been used for something other than keeping us on the earth. Most of the old science fiction I remember was always about space travel and there isn’t a gravity there. As to oil being replenished, I recall a story about a Gulf offshore well having more oil than when it was drilled.

        • 91B20 1stCav (AUS) says:

          Softtail-to reprise Chester Gould & ‘Diet’ Smith: “…the nation that controls magnetism will control the universe!..”.

          may we all find a better day.

        • VintageVNvet says:

          guy’s just wanta have fun some times AA!!
          let the concept of harvesting gravity become endemic, then stand back and watch the global transitions
          as to gravity in space, who says it ain’t just like light

      • unamused says:

        “more GUV MINT control of our individual lives as GUV MINT once again seeks total hegemony.”

        That explains why birds aren’t real, because they were all replaced with feathered drones to spy on you. What you have not yet figured out that the universe was destroyed last week and replaced with an exact duplicate.

        Seriously, controlling the general population is what corporations do, not only by controlling money but also by replacing culture with marketing. Works with most people. Corporations won those turf wars a long time ago.

        Like I told Zonker, the reason we have government in the first place is because people are NOT inherently unselfish and kind. But hell, what do I know? I’m a begonia.

        • 91B20 1stCav (AUS) says:

          una-another on-point last paragraph. Have always felt that government-of ANY type-arises from our species’ seeming general inability to critically think-ask realistically: ‘…and THEN what?…’ after the ‘revolution’ (Marx’ basic error in his solutions)…

          may we all find a better day.

  48. Jon says:

    I have cut down on my gas usage quite a bit.
    I try to be more cognizant now a days about burning gas.

    I want to go full electric and install solar panels with battery backup

    Hopefully one day

  49. eg says:

    Won’t be driving during our vacation in St John’s, Newfoundland this summer — a car cannot be rented for any price.

  50. Michael Engel says:

    In Mar 2020 Alberta CNQ & CVE log were shredded, but now :
    Jan 18 to Mar 8 to Apr 18 highs.

    • Anthony A. says:

      You would have expected this, right? Canadian oil is “hot” right now (as is U.S. oil producers).

  51. JeffD says:

    For the first time in my life, I ate at the place across the street today rather than spending $3 in gas to go where I wanted. Expect the demand destruction numbers to show up in the upcoming report for April.

  52. Zoo-lander says:

    According to Rystad, the current resource replacement ratio for conventional resources is only 16 percent. Only 1 barrel out of every 6 consumed is being replaced with new resources

    Shale binge has spoiled US reserves, top investor warns Financial Times.

    Preface. Conventional crude oil production may have already peaked in 2008 at 69.5 million barrels per day (mb/d) according to Europe’s International Energy Agency (IEA 2018 p45). The U.S. Energy Information Agency shows global peak crude oil production at a later date in 2018 at 82.9 mb/d (EIA 2020) because they included tight oil, oil sands, and deep-sea oil. Though it will take several years of lower oil production to be sure the peak occurred. Regardless, world production has been on a plateau since 2005.
    What’s saved the world from oil decline was unconventional tight “fracked” oil, which accounted for 63% of total U.S. crude oil production in 2019 and 83% of global oil growth from 2009 to 2019. So it’s a big deal if we’ve reached the peak of fracked oil, because that is also the peak of both conventional and unconventional oil and the decline of all oil in the future.

    • Isaac S. says:

      re “So it’s a big deal if we’ve reached the peak of fracked oil, because that is also the peak of both conventional and unconventional oil and the decline of all oil in the future.”
      not true. US shale oil only stopped new investments in UDW & CND tar sands b/c uneconomic at $80 cash costs, UDW will ramp up.

      CND oil sands will likely get their pipes (TMP & KXL) done by ’22 adding over 1MMbbpd, which would likely offset any declines in US shale. I’m thinking that UDW (e.g., XOM doing both) already smells blood in US Shale Tier 1 so is itching to pull trigger on short lead time bolt-on projects and give FIDs on 2-3 year lead mega UDW projects, esp. while UDW day rates/costs are in the toilet. Watch for a surge in UDW seismic as the signal. I’m expecting that UDW is even more closely watching China, if she’s doing to have a hard-landing then all FIDs (incl. for LNG) are off and if looking more like soft landing then the cheap money drives UDW, Tier 2 shale oil, and Russia (incl. via restoring VZ output). Just way too much cheap money, huge leaps in extraction technology efficiencies slashing costs/decline rates, and fears of the death of oil will spur way over production buy all producers so they are not the last one with (worthless) oil stuck in the ground. Solar & wind electricity is officially now cheaper than all fossil fuel power. Cars are next.

      IMHO. any oil price spike would just make EVs and solar much more cost competitive, and rapidly speed up their mass adoption rates, esp. in commuter and fleet/bus vehicles, much like how the oil embargo of the 70s created and launched the Japanese small car market (to this day), and nearly killed the ‘big 3’. No way ‘big oil’ would invest in mega projects knowing that by the time they ever get to production global demand would be down trending. B/c we’ve passed global peak demand. So, they’ll just put cap ex on short cycle oil E&P in the US shale oil and Canadian oil sands, which have plenty of spare capacity to keep Brent under $90 in most likely demand scenarios, esp. if/when Canada gets their transmountain pipeline fully flowing to the ocean. They can add at least another 2-4 MMbpd of relatively cheap capex “assembly line” heavy oil if the world wanted it. That is another area of huge oil spare capacity that most overlooked.

      Also, there is global shale oil untapped yet. Argentina’s shale oil development and production is apparently taking off, and set to soar starting next year. This could be real bad if the US model get replicated in various countries, which Argentina and Russia have always been the prime candidates. Yikes!

      https://www.batimes.com.ar/news/argentina/argentinas-next-leader-will-get-a-commodities-boost-in-2020.phtml
      The nation’s farmers are forecast to push harvests to new highs in 2020, bringing in much-needed dollars.

      Argentina’s shale oil development and production is apparently taking off, and set to soar starting next year. This could be real bad if the US model get replicated in various countries, which Argentina and Russia have always been the prime candidates. Yikes!

      https://www.batimes.com.ar/news/argentina/argentinas-next-leader-will-get-a-commodities-boost-in-2020.phtml
      The nation’s farmers are forecast to push harvests to new highs in 2020, bringing in much-needed dollars. Meanwhile, rising oil production from shale fields should bolster fuel exports, reining in an energy trade deficit.


      Argentina’s burgeoning shale industry is also boosting the outlook in the commodities sector.

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