Generally speaking, the refining industry is stoked. Steady growth in demand and constrained supplies during the past few years have definitely improved their margins and general outlook.

But Booz Allen Hamilton has injected a dark cloud into this sunny picture in the form of a new report—U.S. Refining Trends: The Golden Age or the Eye of the Storm?—warning refiners that shifts in consumer behavior, government regulations and auto technology could drastically lower demand for gasoline and erode their profitability.

Booz Allen devised three scenarios that would create unexpected shifts in the two factors that determine demand—miles driven and vehicle fleet efficiency—and analyzed the potential impact of each of them on the refining industry.

The scenarios and the outcomes aren’t particularly surprising: higher pump prices, regulatory changes or new auto technologies all lead to a decrease in gas consumption. The timing analysis, though, is interesting.

In Scenario 1, consumers continue to pay high prices at the pump, due to fundamental or geopolitical impacts on crude price or refining structural changes. The result is a short-term reduction in miles driven, with a medium-term shift to smaller, more fuel-efficient vehicles. Booz Allen estimates that gasoline demand could fall below domestic supply capabilities (i.e., a surplus due to a drop in consumption) as soon as 2007.

In both the regulatory and new technology scenarios, that crossover point doesn’t occur until 2010.

While the authors acknowledge that none of these scenarios is likely to occur exactly as laid out, elements of each could affect the future market for both fuel and autos, noted Booz Allen Vice President Robert Lukefahr. “If nothing else, it is clear that refining executives will need to incorporate the possibility of a downturn into their planning,” said Lukefahr, who noted that the cyclical industry has a heritage of low returns. “In fact, the entire automotive industry should track consumer behavior and weigh longer-term actions carefully.”

Good advice in any situation.

Some of the assumptions that went into this study may seem pretty conservative in a few months. To reach crossover by 2007 in the first scenario, for example, Booz Allen assumed a constant real price of $2.00/gallon for gasoline. What if it stays higher? How much faster would the shift happen?