Wait… Gasoline exports are on the rise.

by Wolf Richter for Wolf Street.

With the average price of gasoline above $5 on Monday, up 63% from a year ago, according to Energy Information Administration data, and after it topped $4.20 for the first time ever in mid-March, people are already starting to drive less, and families are giving Priority to their most fuel efficient vehicle. Buying patterns are already changing in favor of smaller fuel-efficient vehicles, hybrids, and electric vehicles, except for selling outright, while pickup trucks and larger SUVs are starting to pile onto a lot of dealers.

The destruction of demand for gasoline has already begun. In October, November and December last year, gasoline consumption exceeded the levels of the same period three years ago, in 2018. In the first half of this year, consumption was less every week than in the first half of 2019, the last year before the pandemic changed everything .

EIA measures gasoline consumption in terms of barrels supplied to the market by refineries, mixers, etc., and not through retail sales at gas stations.

Gasoline prices began to rise in 2020, reached their highest levels in several years in May 2021, and have continued to rise. Then in 2022, prices started going up…

…and seemingly hit the magic number somewhere along the streak, and suddenly gasoline consumption started falling well below the same weeks in 2019, based on a four-week moving average.

The summer driving season has begun in the US, and gasoline consumption has risen this year, but more slowly than in 2019.

The red line in the graph below spans June 2021 through June 2022. The gray line spans the same weeks in 2018 and 2019. Note how in June through December 2021, consumption closely tracks consumption in the same period three years earlier, in 2018.

In the week ending June 10, consumption was 9.02 million barrels per day (four-week moving average), down 5.4% from the same week in 2019:

What everyone now wants to know is: When will the demand for destruction be great enough to cause gasoline prices to fall?

It is complicated by the large exports of gasoline by the United States To other countries, it currently operates at more than 900,000 barrels per day, which is approximately 10% of US domestic consumption.

Even if consumption in the US continues to decline compared to 2019, foreign demand – higher exports – could offset this. So we don’t want to get our hopes up that the destruction of domestic demand by oppressed and frustrated American drivers can limit price hikes.

But if demand destruction in the United States is large enough and sustainable, and supported by demand destruction in other countries, there may eventually be an impact.

Exports are highly seasonal, usually peaking during the winter when demand is lowest in the United States, and then dropping sharply during spring and summer when demand is highest in the United States. But this year, over the past three months, exports are up 20% to 40% compared to the same period last year, in the driving season:

Long-term demand, US gasoline demand is already declining. But it will be a slow process. The current consumption level of 9.02 million barrels per day was first affected in July 2000. Gasoline consumption peaked on an annual basis in 2007, declined for years, and then rose again to match that level again in 2016, 2017, 2018, and 2019.

Higher prices and shifts by consumers into purchasing small cars, hybrids, and electric vehicles (including large electric vehicles, such as vans) now underway will cause future gasoline consumption to decline in the United States.

But wait… the industry is already preparing for it. The non-growth nature of US gasoline demand is not new. Investment in refineries has been put on the other side, and many executives in the oil industry have pointed this out. The entire industry is striving to keep supplies tight to manage the decline in gasoline consumption over the decades and to maximize profits in the process.

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