NEW YORK: Gasoline demand plunging below pandemic levels isn’t just about Americans driving less, according to veteran oil analyst Paul Sankey.
“It is a change in the kind of vehicle people are driving,” Sankey, the founder of Sankey Research LLC, told Bloomberg Television Thursday.
“I think cars are more efficient.”
The four-week average of US gasoline consumption — the best gauge for the country’s demand — dropped lower last week than during the summer of 2020, when pandemic travel restrictions severely limited movement. The dip comes even as retail fuel prices have fallen for more than 50 days straight.
An increase in the adoption of fuel-efficient and electric cars may go part of the way towards explaining why gasoline consumption is now more than 1 million barrels a day below pre-Covid seasonal norms.
Average fuel economy increased to a record 25.4 mpg (9.2 l/100km) for model year 2020, continuing an upward trend that will likely accelerate with the Biden administration’s new efficiency rules.
Electric vehicles make up just 5% of new car sales.
Sankey noted that the swiftness of the demand drop suggests that behavioural changes are a factor.
“There’s a tremendous amount of gasoline demand in the US that’s discretionary,” he said.
“The speed of the change does look like there’s marginal behaviour change, but I think underlying is a rolling significant increase in new-car efficiency that would have a significant effect at the margin on US gasoline demand.”