The current administrations attacks on the “fossil fuel” industry have caused a sharp rise in gasoline prices. Traditional economics tells us that when the price of anything goes up, demand and use goes down. So Dave Dixon took a look at the last few years of gasoline use. You see the sharp drop during the early period of the epidemic followed by the rebound and then a decline as prices rose. Here is the practical consequence of this, aside from the acute financial pain to the majority of Americans who live paycheck to paycheck. This means parents who can’t drive their children to a park, or to visit friends or to engage in sports activities. It means families who can’t visit relatives or friends. It means people may be forced to take unsafe public transportations. It means less road trips, providing less revenue for resorts, hotels and restaurants.
Whacko progressive’s answer to this is to tell people to buy electric vehicles, which are incredibly expensive and which need electricity, the price of which is rising by double digits.
- The U.S. Energy Information Administration (EIA) publishes a wide variety of energy information. We were interested to see what gasoline demand might tell us about the state of the US economy, given high gasoline prices and negative GDP growth. One recent article published by the EIA (https://www.eia.gov/
petroleum/weekly/archive/2022/ 220707/includes/analysis_ print.php) noted that current gasoline consumption had fallen below the consumption level seen in 2021, linking the drop in consumption to high prices.
- Fig. 1 displays the estimated US gasoline demand, in thousands of barrels per day. The data is available from the EIA here: https://www.eia.gov/opendata/
v1/qb.php?sdid=PET.WGFUPUS2.W. The parameter plotted is “U.S. Product Supplied of Finished Motor Gasoline, Weekly”. The EIA defines this variable as the approximate weekly consumption of gasoline, because it is a measure of the shipments of gasoline out of refineries, storage facilities, pipelines, etc. There are several interesting features in Fig. 1: 1). The general flattening and decline of the curve starting around 2006. 2). An increasing trend starting in 2014. 3). The dramatic drop in consumption in early 2020 during the first Covid shutdowns. 4). The recovery to pre-Covid consumption levels in mid-2021. 5). Decline in consumption in 2022.
- Fig. 2 displays this same data as Fig. 1, but with the years 2018 through 2022 overlayed to make it easier to compare one year to the others. Here 2020 (gold curve) stands out for its decreased consumption, along with the first several months of 2021 (blue curve). The second half of 2021 appears almost identical to 2018 and 2019. Consumption in 2022 (red curve) started out to the pre-Covid years but then starting declining, and is now roughly the same as the same time in 2020.
- Fig. 3 displays the average retail U.S. price per gallon for conventional and reformulated gasoline. The data was downloaded from this page https://www.eia.gov/petroleum/
gasdiesel/ using the link titled “full history”. The average US price per gallon peaked on approximately 6/20/2022, but we have yet to see consumption increase materially. If the decrease in demand is due to high prices then we should see demand increase, although there may be a lag before people’s behavior changes. However, if the decrease in demand is due to the overall decline in GDP in the first half of 2022, then it is possible that the decrease in prices is due to the decrease in demand.