Average gas price $6.20/gal by end of Summer

[Out of Steam]

^^^ Thanks.

Supply is obviously below normal. And motorists are not as willing to pay the price they did just a few weeks ago hence the price has dropped, which is to say demand has weakened.

I did two long-distance drives into the Northeast in late May and early June, and thought that traffic was lighter than normal.

 

[Out of Steam]

Since the normal seasonal peak in gasoline prices is around Memorial Day, it's been my expectation that prices wouldn't climb further this year.

Here's my opportunity to toot my own horn. As a big believer in seasonal trends, I write the above on June 18th, predicting that gas prices had peaked.

Maybe I should try stock picking.

 

[Car-Guy]

^^^^^
I hope you don't have to retract that! (Summer ain't over yet)

 

[REWahoo]

^^^^^
I hope you don't have to retract that! (Summer ain't over yet)

I also hope he doesn't!

Although prices here are now in the $3.30 range, both Summer and hurricane season have a long way to go.

 

[NW-Bound]

The hurricane is indeed a factor of yet unknown weight.

About the summer demand, I have my doubt that it will pick up. The economy is slowing down, and I have been reading about ERs now regretting their quitting and wanting to get another job, new graduates facing a tougher job prospect, etc...

 

[Koolau]

^^^ Thanks.

Supply is obviously below normal. And motorists are not as willing to pay the price they did just a few weeks ago hence the price has dropped, which is to say demand has weakened. Yet, the traditional summer driving season does not end until September.

From a Web site:



Gasoline demand lower this year than in 2020, when COVID was raging? I did not expect this.

Hey, that price increase really worked at lowering demand - just like it always does. Gasoline is less price-elastic than, for instance beef or fresh fruit but it's not inelastic. If nothing else, folks will drive their best MPG car and leave the other at home. The "relative" inelasticity works both ways. It doesn't take much drop in demand to lower prices. There is relatively little storage for fuel, so prices seem to fall quickly after big run ups in price curb demand. No expert, but supply and demand is pretty much immutable (except for short periods of adjustment.) YMMV

 

[NW-Bound]

Hey, that price increase really worked at lowering demand - just like it always does...

Sure.

But remember that at the peak of COVID, public places were closed. People were advised to stay home, except for essential errands like going to doctors and to get food. Airplanes did not fly, because countries closed their borders.

Yet, people were driving more then than now. Where did they go? Where could they go?

 

[Out of Steam]

The hurricane is indeed a factor of yet unknown weight.

About the summer demand, I have my doubt that it will pick up. The economy is slowing down, and I have been reading about ERs now regretting their quitting and wanting to get another job, new graduates facing a tougher job prospect, etc...

A hurricane is the most likely thing to make me have to eat my words.

 

[aja8888]

Just remember folks, that gasoline pricing is based on crude futures pricing and that pricing is based on worldwide crude production (WTI, Brent and 100+ other quoted prices). It's complicated, and after 35 years in the business, I still cant' figure it out.

While we produce 11+ million BPD of crude oil here in the U.S, and we export some of that, we also import foreign crude to the extent of 11 million BPD for over 20 countries. Plus, we both import and export refined products.

It's complicated, and prices of refined products can change in a heartbeat.

Enjoy the low prices now, though.

 

[NW-Bound]

Needless to say, we made no trips in 2020 and 2021. Finally, earlier this year in April we did a fly-and-drive trip, and in Houston stayed at a hotel along Freeway 8.

I made a small talk with the hotel clerk about how bad traffic was. He said that during Covid, one could lay down in the middle of Freeway 8 and be safe.

So, how could people use less gasoline now compared to then?

Oh, I know. We all drive EVs now.

 

[Sojourner]

I did two long-distance drives into the Northeast in late May and early June, and thought that traffic was lighter than normal.

I haven't gone on any long, multi-state road trips recently, but the routine, weekly driving I do here in the Atlanta area gives me the strong impression that there are more people out on the roads, at all times of the day, than ever before. I really cannot ever remember seeing this much traffic—everywhere, all the time—at any other point in my life. It's honestly gotten to the point where I almost expect there to be substantial congestion and slowdowns every time I get on one of the major freeways around here, no matter what day or what time of day it is.

I suppose it could be recency bias or selective memory coloring my perceptions, but I really don't think so. It will be interesting to see what happens as kids go back to school (many of them starting today) and the summer begins to wind down.

Meanwhile, gas prices continue to slowly fall around here. Hovering right around $3.90/gal locally.

 

[Midpack]

I haven't gone on any long, multi-state road trips recently, but the routine, weekly driving I do here in the Atlanta area gives me the strong impression that there are more people out on the roads, at all times of the day, than ever before. I really cannot ever remember seeing this much traffic—everywhere, all the time—at any other point in my life. It's honestly gotten to the point where I almost expect there to be substantial congestion and slowdowns every time I get on one of the major freeways around here, no matter what day or what time of day it is.

I suppose it could be recency bias or selective memory coloring my perceptions, but I really don't think so. It will be interesting to see what happens as kids go back to school (many of them starting today) and the summer begins to wind down.

Meanwhile, gas prices continue to slowly fall around here. Hovering right around $3.90/gal locally.

Or Covid helped you forget what normal traffic is like, traffic was way down for most of 2020 as I recall. Traffic seems about the same here, no better no worse.

 

[NW-Bound]

Here's the article I talked about earlier. It's reprinted from Bloomberg by Yahoo Finance, and is free reading.

Gasoline Demand Stalls at Height of US Summer Driving Season - July 20, 2022

(Bloomberg) -- US gasoline demand remains below where it was this time two years ago as historically high prices keep more drivers off the road than Covid-19 did in the summer of 2020.

A small week-over-week rebound in demand last week was not enough to top the same period in 2020. On a seasonal four-week rolling average -- which smooths out weekly fluctuations -- consumption is just above the same time two years ago, but below every other year going back to 2000, according to data from the US Energy Information Administration.

It's hard to believe, is it not, that people drive less now than in the COVID peak of 2020? How to explain all the cars on the road now, compared to back then?

See: https://finance.yahoo.com/news/gasoline-demand-stalls-height-us-165111254.html


PS. A possible explanation is the composition of the cars on the road now, vs. then. Many families have multiple vehicles. If they switch to a smaller car, there may be more cars on the road now, compared to the summer of 2020. Yet, a small car may have 1/3 or 1/2 the gas consumption of a bigger vehicle, resulting in less overall consumption.

I still don't think it's enough. Traffic was so low back in 2020. There's something just not right.

 

[madatrub]

Here's the article I talked about earlier. It's reprinted from Bloomberg by Yahoo Finance, and is free reading.





It's hard to believe, is it not, that people drive less now than in the COVID peak of 2020? How to explain all the cars on the road now, compared to back then?

See: https://finance.yahoo.com/news/gasoline-demand-stalls-height-us-165111254.html


PS. A possible explanation is the composition of the cars on the road now, vs. then. Many families have multiple vehicles. If they switch to a smaller car, there may be more cars on the road now, compared to the summer of 2020. Yet, a small car may have 1/3 or 1/2 the gas consumption of a bigger vehicle, resulting in less overall consumption.

I still don't think it's enough. Traffic was so low back in 2020. There's something just not right.

I dont believe this at all. I remember driving around the peak in 2020 and I was the ONLY car on the Garden State Parkway. There's noway.

 

[Sojourner]

I still don't think it's enough. Traffic was so low back in 2020. There's something just not right.

I agree 100%. No way there are fewer cars on the road in July 2022 than there were in July 2020. Absolutely no way. I have been stuck in numerous traffic jams, probably to the tune of around one (on average) every time I've driven on a highway this summer. That absolutely was not the case in 2020, or 2021.

 

[NW-Bound]

The enquiring minds want to know, so I went to the EIA Web site to get the raw data. Below is the weekly gasoline supplied in the US.

My observations:

1) The reduction of consumption is obvious in 2020, but it was not as much as I thought. This is a surprise.

2) The consumption in 2022 is LESS than in 2021.

3) The consumption since COVID is definitely less than during pre-COVID, meaning in 2018-2019.


The points 2) and 3) show that supply was definitely less than pre-COVID, causing prices to be higher yet demand is less. Of course, we already know about less crude production, and reduced refinery capacity. No mystery here.

 

[NW-Bound]

Here's the US supply of jet fuel. The impact of COVID is a lot more profound.

My observations:

* If jet fuel consumption is taken as an indicator of air travel, then air travel has not recovered to the level pre-COVID.

* If air travel is not at the same level as pre-COVID, then airport terminal congestion is not caused by too many flights.

 

[madatrub]

Just remember folks, that gasoline pricing is based on crude futures pricing and that pricing is based on worldwide crude production (WTI, Brent and 100+ other quoted prices). It's complicated, and after 35 years in the business, I still cant' figure it out.

While we produce 11+ million BPD of crude oil here in the U.S, and we export some of that, we also import foreign crude to the extent of 11 million BPD for over 20 countries. Plus, we both import and export refined products.

It's complicated, and prices of refined products can change in a heartbeat.

Enjoy the low prices now, though.

Curious where you spent time in the business? Upstream/Midstream/Downstream?

 

[madatrub]

Here's the US supply of jet fuel. The impact of COVID is a lot more profound.

My observations:

* If jet fuel consumption is taken as an indicator of air travel, then air travel has not recovered to the level pre-COVID.

* If air travel is not at the same level as pre-COVID, then airport terminal congestion is not caused by too many flights.

TSA tracks throughput, and your first point is accurate. We are still not back to Pre-covid travel. Its likely some mix of business and international travel.

 

[Zathras]

I suspect that while driving patterns changed during Covid, the amount of driving didn’t take as big a hit as many saw.
I noted slightly less traffic, but I almost never drove during rush hour(s).
Rush hour traffic was probably slashed dramatically.

 

[aja8888]

Curious where you spent time in the business? Upstream/Midstream/Downstream?

Worked in operations early on, then in a senior management position with ARCO in Caifornia. After ARCO got sold off in pieces, I started my own engineering consulting firm and specialized in conducting due diligence for acquisition of petrochemical and oil & gas companies (buy/sell). Lots of field experience in all kinds of Up/Mid/Down facilities worldwide.

Old dude and play golf now! (no more airplane rides!)

 

[madatrub]

Worked in operations early on, then in a senior management position with ARCO in Caifornia. After ARCO got sold off in pieces, I started my own engineering consulting firm and specialized in conducting due diligence for acquisition of petrochemical and oil & gas companies (buy/sell). Lots of field experience in all kinds of Up/Mid/Down facilities worldwide.

Old dude and play golf now! (no more airplane rides!)

The refinery side is very incestual. I'm willing to bet we've crossed paths before.

 

[aja8888]

The refinery side is very incestual. I'm willing to bet we've crossed paths before.

Very possible over the years. What did you do in the energy field?

 

[madatrub]

Very possible over the years. What did you do in the energy field?

25 years in refineries. Ops, Technical, Management, etc. Finishing the final 10 years of my career in mostly a consulting capacity on corrosion/desalting/fouling

 

[aja8888]

25 years in refineries. Ops, Technical, Management, etc. Finishing the final 10 years of my career in mostly a consulting capacity on corrosion/desalting/fouling

Sounds like you have paid your dues like I have.