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Gas Usage Heads Down

April 22, 2008 by   - () Leave a Comment

U.S. drivers are doing something they haven’t done for nearly two decades — consume less gasoline.
Gas consumption so far this year is down about 0.2% compared to last year, according to the Energy Information Administration. The federal agency is predicting that gasoline demand will be down 0.4% this summer and 0.3% for the year, the Kansas City (Mo.) Star reported.
That may not sound like much, but it would be the first time since 1991 that there’s been a decline in annual gas consumption. And it would be only the eighth year since 1951 in which demand for gasoline has declined.
The federal agency noted that the decline was occurring in part because of a slowing economy. But it also said that higher gas prices were having an effect on demand.
“Sustained higher gasoline prices are beginning to show up in lower gasoline consumption,” said Tancred Lidderdale, an analyst for the Energy Information Administration.
Both gasoline and diesel prices are now at record levels.
According to AAA, the national average on Monday (April 21) for a gallon of gasoline was $3.50, or 64 cents higher than a year ago. Diesel was $4.20 per gallon, or $1.27 higher than a year ago.
A gallon of E-85, a blend that contains 85% ethanol, was $2.89 a gallon. AAA also gives an adjusted price reflecting the fact that ethanol has less energy than conventional gasoline. By that measure, a price-adjusted gallon of E-85 was $3.81.
Crude oil prices were up on Monday for the sixth straight day. Light, sweet crude for May delivery rose to a record $117.76 a barrel on the New York Mercantile Exchange before settling at $117.48, up 79 cents from Friday’s close.
Figures that track gas consumption can be volatile from week to week. But the idea that demand for the year will be down is gaining support.
Lehi German, publisher of Fundamental Petroleum Trends, said the federal agency’s prediction of a downturn was “in the ballpark.” In addition, diesel demand has shown signs of softening as well.
Although higher fuel prices were expected to have an effect on demand, it wasn’t clear just how high they would have to go to do so. Many market watchers believed prices would have to stay above $3 per gallon for several months or even a year.
That tipping point for gasoline demand may have arrived.
Mike Right, a spokesman for AAA Club of Missouri, said that a decline in gasoline usage shouldn’t come as much of a surprise. A survey conducted in January by AAA found that many motorists were already deciding to change vacation plans for this summer by planning for shorter trips.
“We are starting to see some signs of that,” he said.
There are indications that a fundamental shift in consumer driving habits may have started in December, when total miles traveled in the U.S. dropped 3.9% compared with the same month a year earlier. Miles traveled in the Midwest were down 5.8%.
Mainly because of the December drop, the Federal Highway Administration said it was estimating that miles traveled for all of 2007 were down 0.4%.

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