The Demand For Gasoline In The U.S. Has Passed Its Peak. The Reason Is Not Solely Due To Electric Vehicles.

In the US, gasoline sales seem to have reached their all-time high.

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People are filling up less frequently even as the pandemic subsides and more Americans travel because of societal changes and rising sales of electric and hybrid vehicles. Although gasoline won't disappear anytime soon, it will start to drive off into the distance starting in late 2019. Gasoline has driven America for a century.

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Around 8.8 million barrels of gasoline were consumed daily by Americans in 2022, down from 9.3 million barrels in 2019, based on the Energy Information Administration, the country's research arm. Energy Division. The pandemic undoubtedly made things more challenging, but recent statistics have made the pattern crystal evident. Demand has been declining during the past four weeks in 2023, falling 1% from levels at same time last year. Analysts are increasingly doubtful that it will ever return to its earlier highs.

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Working from home is undoubtedly one of the reasons behind the transition, but there are other variables as well. After 2020, the trend has subsided, although millions fewer individuals commute to work each day than in 2019. According to a McKinsey survey, 35% of Americans could work from home five days per week as of last year, and more than half had the opportunity to do so at least once per week.

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Tom Kloza, the OPIS's worldwide head of energy analysis, believes that this change has had a substantial impact on the drop in gasoline usage. The fact that gasoline costs were so high a year ago didn't help either. "Last year, there was that unfounded assumption that everyone wanted to leave Covid because they were so sick of it. But I believe that when gas prices rose to $5 per gallon, they decided not to travel, Kloza said in an interview. 

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The decline can't be explained largely by pain at the pump, however. The recent drop in gas prices-to $3.40 per gallon now-would cause a full recovery if they were entirely due to high prices. It was almost certainly influenced by other, more structural factors.

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In an estimate by Natasha Kaneva, global commodities research manager at JP McKinley, the decline in demand for gasoline is attributed to high prices by 45%, working from home by 34%, and electric and hybrid cars by 19%. Despite traveling more miles in 2022 than in 2021, Americans used less gasoline, Kaneva reported in recent research. The price of gasoline had risen to $3.70 by September 2022, and Americans were traveling even more than they had before the pandemic-but demand for gasoline had not reached its previous levels.

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It is expected that there will be a slight rebound later this year, according to Kaneva. In 2018, the demand for oil will reach 8.88 million barrels a day, an increase from 8.83 million barrels a day in 2017. By 2024, it could reach 8.95 million barrels. It is unlikely, however, that demand will ever return to its August 2019 peak of 9.85 million barrels, or to its 2018 peak of 9.3 million barrels. Kaneva predicts the gasoline demand will fall to 7.4 million barrels a day by 2030, down 16% from 2022, if automakers reach their electric vehicle production targets.

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Data showing the impact of policies implemented more than a decade ago is now beginning to show up, Kaneva wrote. As a result of a generation of cars with more efficient engines as well as electrical vehicles, American drivers are driving fewer miles on less fuel than ever before."

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U.S. passenger vehicle sales grew by about 6% last year from electric vehicles to 1% on the road. In addition to reducing gasoline demand, vehicle-efficiency standards have also reduced fuel consumption considerably, and their requirements are set to become even more stringent over time. A 49 mpg fuel economy standard is set to be implemented in the United States by 2026. In 2026, new cars will average 33% more miles per gallon than 2021 models, so drivers will only have to stop for gas three times on a trip where they need to stop four now.

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U.S. refineries have seen new markets for their product even as U.S. gasoline demand declines. Based on the latest estimates from the Energy Information Administration, U.S. refineries shipped 887,000 barrels of gasoline abroad every day in 2022. Over the past decade, they have doubled their purchases. While overseas markets may buy gasoline in the future, they may not do so forever. According to Raymond James analyst Pavel Molchanov, electric vehicles will account for 14% of light-duty vehicle sales worldwide in 2022. The Chinese market share was 30%. Molchanov was surprised at the rapid growth of electric vehicle sales. It was originally estimated that 9.3 million electric vehicles would be sold in 2022. The actual number of sales was around 10.1 million. 

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As a result of electric vehicle adoption, 1.5 million barrels per day have already been shaved off daily global oil consumption, and by 2025, 2.6 million barrels and 7.4 million barrels will have been shaved off daily consumption, according to Molchanov. The global consumption of gasoline today amounts to about 25 million barrels per day. However, determining the direction of global gasoline demand isn't as straightforward as drawing a straight line downward. However, there are many other factors that are causing demand to rise despite electric vehicles. The population growth in parts of the world, such as India, and the increase in total vehicle sales, both petrol and electric, should increase demand for gasoline. As the electric-vehicle market grows larger, Kaneva estimates last year that the global gasoline demand will peak around 2025. 

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There's no sign that oil will disappear anytime soon, apart from gasoline. There are approximately 100 million barrels of oil consumed worldwide every day, and certain types of oil products are in increasing demand, such as jet fuel. It is likely that total oil demand will continue to rise even if gasoline and diesel demand fall due to the adoption of electric vehicles. Kaneva predicted that between 2019 and 2030 the only oil product that would see declining demand was gasoline. The oil demand is expected to rise for several years, before plateauing around 2030 according to several analysts, including Molchanov. In an interview, he said that “the more interesting question is, what will happen after it peaks? “ According to an interview with him.

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The answer to that question is crucial for all oil supply chain companies. Those who sell gasoline have an even greater need to answer this question. A gas station's business model could affect how it does, Kloza of OPIS said. In contrast, the future looks bleaker for mom and pop businesses that sell petroleum products from companies such as Exxon Mobil XOM +0.89% (ticker: XOM). Side businesses such as cigarettes can't necessarily make up for a drop in gas sales at these stations where gasoline is the main product. According to the latest OPIS statistics, volumes at average stations are down about 20% from 2019.

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Sheetz and Wawa stations might do better because ancillary items like food account for a large portion of their sales.

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Big box stores, however, that offer discounted gasoline as part of their membership plans are best positioned today. As people flocked to Costco (COST) for cheaper gasoline, the company has clearly gained market share. According to the company, its recent quarter saw it charging 37 cents per gallon less than the average station. Gas has historically been a big attraction for new members, so the company has been willing to make thinner margins. For now, Costco looks happy to focus on gasoline instead of electric vehicles, although it may have to think more about them in the future. 

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Richard Galanti, CFO of General Motors, said on a conference call last week that he is not concerned about gasoline sales being affected by the rapid rise of electric vehicles. It's a question that can be deferred for five or ten years, honestly."

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Due to its many other benefits, Costco will not be affected by changes in driving habits. Furthermore, since California is its largest market, where EVs are really taking off, the company could simply switch from cheap gas stations to cheap charging stations. There have already been some installations. A short-term expansion of these services may be necessary based on current trends.

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