Gasoline sales in the U.S. exceeded 2020 levels for the first time this March after a tough year of decreased demand. Same-store sales of U.S. gasoline in gallons for the week ending March 20, 2021, were just over 10 percent higher than 2020 according to an Oil Price Information Service (OPIS) survey by IHS Markit of over 25,000 gas stations countrywide.
Brian Norris, executive director of retail fuels at OPIS stated of the change, “The year-on-year increase in fuel demand from March 2020 is certainly welcome news for the recovery of the economy and the beginning of the return to normal life for the American people”.
However, a return to pre-pandemic levels of demand still appears a long way off. On average, until this positive rise in demand, gas volumes have remained between 15 and 18 percent lower than 2020 levels since the beginning of the year.
While the increase looks promising, it marks the one-year anniversary of Covid-19 restrictions being implemented across the U.S., causing a significant drop in demand that resulted in a 27 percent decrease in oil consumption in April 2020.
The Wall Street Journal presented an altogether more pessimistic view of the future of the global gasoline market earlier this month. The International Energy Agency (IEA) forecast that gasoline demand has already peaked, expecting people to move towards electric vehicles (EV) and gasoline-efficient vehicles in the coming years.
Many large companies have already announced their movement away from traditional gas vehicles over the next decade and a half. General Motors Co. expects to stop selling gas-powered vehicles by 2035 and Sweden’s Volvo plans to be all-electric even earlier, by 2030.
It is expected that by 2026 as many as 60 million EVs could be on the roads, according to the IEA, an increase from 7.2 million in 2019.
However, some analysts believe that the gasoline-boom is here to stay. With millions relying increasingly on home-delivery services, such as Amazon and food delivery companies, there is a continued demand for gasoline to fuel these services.
In addition, flight travel is on the up in the U.S., thanks to a newly vaccinated proportion of the population and optimism for the coming months, increasing the demand for jet fuel once again. CEOs of several U.S. airlines highlighted the increase in reservations this month, for both the short and long-term.
Despite lower levels of demand for gasoline than before the pandemic, U.S. coronavirus infection rates fell to a record low earlier in March. This is expected to see people recommence some of their normal activities going into the summer months when gasoline demand is usually high.
Trisha Curtis, chief executive officer at oil analysts PetroNerds in Denver explained, demand “will continue to improve with warmer weather and reopenings and things getting back to normal, coupled with pent-up demand”. “We definitely see some bright spots with vaccine uptake”.
The American Automobile Association (AAA) has also highlighted the rise in gasoline demand by the continual increase in gas prices this year. AAA believes that the increase in prices reflects pre-pandemic levels which were all but forgotten following a long year of restrictions. In fact, gas prices rose for 17 weeks straight, the longest streak since 1994.
While EV and the movement towards less gas-guzzling vehicles will inevitably change demand patterns for gasoline, it seems that at least for 2021 the oil industry can look forward to increased levels of demand, going hand-in-hand with vaccination efforts and optimism around a new normal.
By Felicity Bradstock for Oilprice.com
