US petroleum consumption – update

Petroleum consumption in the US has recovered somewhat from a low point of 18.3 million barrels a day in October 2008 to levels similar to January averages in previous years. First chart below is an update of a chart I showed previously on total petroleum product demand (includes industrial, residential and freight transportation use of fuel oils as well as gasoline consumption). The second chart shows gasoline demand and average gasoline price. It’s harder to determine the trends in gasoline consumption because of the seasonal driving patterns.

Economic downtown

Here’s what the US Energy Information Administration said today in This Week In Petroleum about the impact of the economic downturn and oil prices on petroleum demand:

U.S. consumption of oil, which has fallen by about 1 million barrels per day (bbl/d) in 2008 relative to 2007, is expected to fall again by a smaller amount in 2009. In contrast to 2008, where skyrocketing prices drove consumption lower, the 2009 decline will be driven by reduced economic activity and will likely be mitigated by substantially lower average oil prices in 2009 compared to 2008.

They are revising their analysis of global oil consumption, production capacity, and exploration and production investment and revised forecasts will be issued in the next Short-Term Energy Outlook (STEO), to be released on November 12.

On October 30th, The US Bureau of Economic Analysis (BEA) said:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 0.3 percent in the third quarter of 2008, (that is, from the second quarter to the third quarter), according to advance estimates released by the Bureau of Economic Analysis.  In the second quarter, real GDP increased 2.8 percent.

Will US demand for petroleum recover?

I’ve been watching US demand for petroleum since July when I first posted on the subject. Demand continued to decline over the summer reaching a low of 18.3 at the beginning of October – well below the peak of 22 million barrels a day in February 2007. The last time petroleum consumption was this low was in 2001.

Now demand has turned the corner and is starting to pick up again. Lower prices for petroleum products are presumably driving this. The question is how much of demand will be recovered? A lot will depend on the state of the economy. But how many consumers may have permanently changed their driving behaviour, or purchased fuel-efficient vehicles? How many have developed an aversion to petroleum products after being stung by the high prices?

Related news article:

• U.S. oil demand down 2 million bpd: BP, Globe and Mail, November 3, 2008

The recent decline in US petroleum consumption

The graph below shows US petroleum consumption since 1995. Demand peaked in March 2007 and the decline since then is quite obvious – it is now back down to 2004 levels. Remember how everyone used to say demand is inelastic? It will be interesting to see how long the decline continues. Will it cause a drop in prices or will rest-of-world demand keep the price up, or will supply increases come online in time to prevent further decline?

Related news articles:

• Driving Less, Americans Finally React to Sting of Gas Prices, a Study Says, NY Times, June 19, 2008.
• Prices Curtail U.S. Gasoline Use, Wall Street Journal, June 20, 2008.
• Gas demand may have topped off, Bloomberg, June 19, 2008.
• With gas prices soaring, Americans driving less, Associated Press, June 19, 2008.
• Gas May Finally Cost Too Much, BusinessWeek, April 23, 2008.
• Short-Term Energy Outlook, US Energy Information Administration.