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US Gasoline Consumption Hits Record for April

11 April 2007

Twip041107
An average retail price of $3.00 per gallon seems to be a price threshold, according to the EIA.

US demand for gasoline the week ending April 6 averaged 9.472 million barrels per day, a record for the month of April, surpassing the previous weekly record for April (9.338 million barrels per day for the week ending April 9, 2004) by 1.4%.

Data for the week ending March 30 was also a record for March, according to the Energy Information Administration (EIA). Demand for the four weeks ending April 6 averaged 9.363 million barrels per day, or 2.5% higher than the same period last year.

With the sharp increase in ethanol blending over the past year, gasoline demand measured in terms of energy content has not grown as fast as the volumetric measure of demand growth cited above, since ethanol has a lower energy content per unit volume than the fuel components it has displaced. But, even taking account of the change in fuel composition, recent data suggest that gasoline demand, however measured, is quite inelastic, meaning that it takes a large increase in prices to significantly affect demand.

—EIA “This Week in Petroleum”

The average retail price for gasoline in the US climbed back up to $2.80 per gallon last week, according to the EIA data.

The last two times the US average retail price for regular gasoline approached and surpassed $3 per gallon (following Hurricane Katrina in 2005 and most of the summer in 2006), gasoline demand growth did slow. The EIA noted that there have been other times that gasoline demand growth has slowed, however.

April 11, 2007 in Fuels, Market Background | Permalink | Comments (46) | TrackBack (0)

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Still hovering at $3.23 a gallon here in San Diego, and I expect $4 this summer. I expect I'll commute with my scooter at least three days a week then.

I wonder what the price has to be to shock American drivers into gasoline conservation; looks like the last hurray before the crash to me! SUVs are at an all time low price and the car companies are offering muscle cars as substitutes for the SUVs. And, all the suckers on sticks are buying them full bore. Kind of like the dot com craze and bust, and now the current real estate market bubble. Autos are next. Time to beat the crowd and move ahead to the future by dumping the gasoline guzzlers and buying green.

This is all fault of Senator Ed Markey for getting the law to change the DST.

I wonder what the price has to be to shock American drivers into gasoline conservation; looks like the last hurray before the crash to me!

Very high. Oil companies stand to profit a lot from any decrease in supply or increase in demand.

In this paper, we compare the price and income elasticities of gasoline demand in two periods of similarly high prices from 1975 to 1980 and 2001 to 2006. The short-run price elasticities differ considerably: and range from -0.034 to -0.077 during 2001 to 2006, versus -0.21 to -0.34 for 1975 to 1980

I can't get too excited about this. The economy and employment are better than 2004. We have more people and vehicles. And prices are lower than recent peaks.

Low prices for SUVs and muscle cars don't always indicate foolish buyers. They nearly always indicate foolish manufacturers won't make any money and will change their offerings.

The time for concern is when manufacturers stop introducing hybrids or other economy offerings. And right now more reach the American market each month.

Same for housing. Most areas are at best stagnant. Some are declining. That is good. When prices are rising twenty percent a year, worry.

There is limited elasticity in demand in response to higher petrol prices. Many people are locked in to buying petrol because they live in cheaper suburbs a long way from public transport. They can't just go and buy a more fuel efficient car because they can't afford it.
This is a social equity issue. Poor people get hurt the most, largely because of poor urban planning and neglect of public transport. Many of us might think it's a good thing when prices go up because it drives innovation in the car industry but there is also a human cost.

Is it safe to say ethanol(E10/85)consumption was also a record? If so, it masks a problem that is worse than these stats show.

It doesn't cost that much to buy a used Honda Fit or Toyota Yaris (Vitz ?)
But then you are left with a rarely used SUV on the driveway.

Gas prices of $3-$3.50/gal may slow demand growth, but they are not reversing it.

It may take a combination of slowly raising fuel taxes to European levels of $6-$7/gal and disbursing the proceeds equally among taxpayers (10 year ramp-up), improved vehicle fleet fuel economy (10 year ramp-up) and, higher-density urban architecture (30 years) to achieve that. The timescales the EIA is looking at are essentially meaningless.

Simply put, for-profit suppliers in a mature industry can only respond to changes in consumer demand, which itself only changes in response to changes in market externalities. Forcing suppliers to produce something no-one really wants (e.g. by tightening CAFE) won't achieve the desired - and necessary - effect. Policy needs to focus on patterns of demand; supply will adapt accordingly, with some delay.

Short term inelastic? Sure.
Long term inelastic? Maybe not.

We're in a situation now where people really believe that the price of gas will continue to go up -- and it's the first time we've been there in a few decades (maybe second: the 70s oil embargo).

So, people's consumption doesn't change as an immediate response to gas prices; rather, they may be more likely to buy a more fuel efficient vehicle if they think prices will continue to go up and it's time for a new car anyway.

We will curb gasoline consumption where we treat it as the utility it is, just like we treat water and electricity. We have a price structure where the more you use, the more it costs per additional unit of consumption.

This solution would not increase the "social inequity" so well described above, and it would encourage investing in hybrids to avoid paying the additional cost of gluttony.

All that is needed is to issue "gas cards" to authorize the purchase of fuel. When the card is "read" the screen would display the amount of fuel used in the last 30 days, and if the amount was less than 60 gallons (average consumption) the cost per gallon would be the market price. However, if and when the consumption exceeded 60 gallons in the last 30 days for the card holder, the price would include a 25% surcharge. For example, say the market price is $2.00 per gallon, once you hit 60 gallons the price per gallon then becomes $2.50.

This would make people aware of their consumption and get them thinking of how to avoid the surcharge. Voila, conservation.

Yes, Do it like they do in Cuba. You get a food card to eat, then when you go to eat there is no food. Comunista's way to solve problems, and its coming to the US.

we will not tax gas any more, we just saw the uber liber Cali reject the assinine production tax increase.
Fortunately their are some folks out there than understand economics.

The California measure was a lot more than just a tax increase, and the opposition opposed it in part because of the fiscal monkey business attached to it.

It is certainly possible for gasoline consumption to go down.  Look at the history; gasoline consumption peaked at 7.4 million bbl/day in 1978, and dropped to 6.5 million in 1982.  Consumption didn't rise to 1978 levels again until 1993, and that was without hybrid vehicles or carbon taxes.

We did it once.  We can do it again.

The government isn't going to raise taxes. Here in New York they even lowered the gas tax last time the price went up. Price shocks will likely be inevitable. It will take a long time for Americans to give up their addition to gas.

The government isn't going to raise taxes. Here in New York they even lowered the gas tax last time the price went up. Price shocks will likely be inevitable. It will take a long time for Americans to give up their addition to gas.

Lets not equate establishing a pricing structure designed to encourage conservation with the central command and control communism of Cuba. The water and electricity rate structures exist everywhere in the USA.
So labeling the plan as communistic seems designed to avoid the reality that gasoline is a limited resource which should be conserved.

Next, we have the argument that establishing a pricing structure equates with an across the board tax increase. No it does not. We have tried the across the board approach and it has failed, people with money still buy SUV's because they do not have to face a gas guzzerler tax when they fill up. Totally different approach. And it does not punish those who are conserving due either to economic issues or environmental issues.

I have always liked the idea of if you use more, you should pay more. That way the people who are making changes get rewarded.
Sign me up.
The price of buying a fuel efficient car is not that much when you consider how much you pay at the pump for an SUV doing 60+ miles per day and 25 on weekends.
Mu used TDI cost me $279 per month for a car payment and I spend about $75 on fuel. My Pathfinder cost me about $295 per month on gas. Now add the Pathfinder car payment and it was $684.00.
Big diference.

They can't just go out and buy a more fuel efficient car? Who told them to buy a car with garbage fuel mileage in the first place. I purchased my current car (with excellent fuel economy figures) in 1999 when I was paying about $1 per gallon. They dug their own grave...they can dig themselves out.

here in Amsterdam, the Netherlands we are about to hit the 1,50 euro a liter level again. now it is 1,459 euro a liter, which is about 5,52 dollar a gallon. and still hybrids won't sell too well. but small cars do.

btw, when i am in hurry, i take my bicycle, off course :)

Van,

I won't say that a graduated pricing structure is "communist." Heck, we even use it for our income tax, and call it "progressive."

The problem is this. It's much easier to implement such a rate structure in a classic utility situation. Your house has one water main, one electric hookup, one gas line, etc. The company serving each utility has to tally your total monthly usage if they are to bill you at all. Since they already have those figures, they can impose any rate structure they want, so long as the state utility commission approves. Hence they can easily charge graduated rates.

Gasoline, however, can be purchased at any station in town -- and there are many companies with many stations. You can pay cash, credit or debit. To establish a graduated rate structure, you'd need to tally a person's consumption across all sales outlets. Hence, to call a space a spade, your ration card ("gas card").

But nobody likes ration cards. The look and feel too much like communist Cuba, or the bad old days of World War II. They're a pain in the rear to both consumers and the issuing authority. Let's say it will cost a dollar a year, per card, to issue, monitor, and implement a gas card system. Across 300,000,000 Americans, that's $300,000,000 dollars per year we could have spent on something else.

Ration cards also promote the establishment of black markets. For instance, an urban-dwelling New Yorker (who never drives anyway) might try to sell his right to 60 cheaper gallons a month to a New Jersey suburbanite, who drives and Hummer and guzzles gas. If gas over 60 gallons per month costs $0.50 more per gallon than gas under the limit, they'd find a way to split the difference. Should we allow that? Even if we did, should be be happy that people are wasting their time putting these trades together?

Why bother thinking about, policing, or running this business in the first place? Is all the effort worth it? Or are their easier and more publicly palatable ways to encourage conservation?

Rafael Seidl is right. Bump up the gas tax and cut the income tax rates, starting with the lowest income bracket, leaving you revenue neutral. Making your cuts starting with the lowest bracket will protect low-earners from the regressive nature of the higher gas tax. In the end, someone who drives the same gas guzzler is no worse off than before. But someone who makes the switch to a more efficient lifestyle has much more to gain, which will probably lead to more people making the switch. And since we already collect gas and income taxes at certain rates already, the marginal administrative cost of tweaking those rates to achieve this result is virtually nil.

Since there is rather direct (reverse) relationship between the price of gas and the sale of gas guzzlers, why not inform the buyers that progressive (10-year) changes will be apllied to reduce gas consumption by 50+% i.e.

1. up to $0.04/month progressive fossil liquid fuel gas tax.
2. up to $100/month progressive purchase penalty on gas guzzlers ($12k after 10 years).
3. up to $6000 (decreasing by $50/month to $0 after 10 years) subsidy or tax credit on the purchase of low consumption vehicles.

This plan could be self financed and have a neutral or a possitive effect on the Federal/States budgets.

The standard economic model says that as the price goes up the demand should go down. However, people need to drive to work to make the money to buy the fuel. So much for that model.

Lower the income tax and bump up the gas tax? That will work for a few years...and then more fuel efficient vehicles, fewer people willing to commute, more carpools and mass transit: Lets see you tell the American people that they now need to raise their income taxes to make up for the shortfall by lack of gasoline tax revenues.

A "ration card" would be trivial to institute. Open your wallet and you should find something with a picture of yourself and basic data describing you...that is right: your state issued driver's license. I'd like to see what state does NOT have the magnetic swipe data strip on their ID cards. You fill up at the gas station by swiping your ID first, data is sent that indicates how much gas you have used and the price is adjusted as needed.

Car pooling? Any ONE of the passengers could swipe their ID. Share your ID with someone else? Sure, why not and if you get caught then the person illegally using someone else's ID can pay the fines just like if you illegally use someone else's ID right now. If the taxes are federally mandated...well, we'd see people doing mandatory jail sentences for tax evasion when they get caught.

Folks, the issue is not only buying a more fuel efficient car, it is also driving it less by combining trips, such as stopping on the way home to pick up whatever, rather than making two trips. We may not be able to carpool to work, but we sure can car pool for lots of weekly errands.

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