The Fuse

U.S. Shatters Record in Gasoline Consumption

by Matt Piotrowski | February 28, 2017

Consumption in the past several years has defied expectations after a number of analysts had argued it had peaked last decade.

U.S. gasoline demand set a record last year, averaging 9.326 million barrels per day (mbd), surpassing the previous peak in 2007. A combination of an extended period of low prices, consumers buying larger vehicles, and strong economic growth has caused demand to soar since it reached its nadir in 2012 at 8.68 mbd. Consumption in the past several years has defied expectations after a number of analysts had argued it had peaked last decade because of fuel efficiency, historically high retail prices, and the aftershocks of the Great Recession.

gasolinerecord

For the month of December, based on revised estimates from the EIA, demand was 9.31 mbd, the highest average for that month in a decade. With retail prices collapsing in 2014 and remaining at relatively low levels, vehicles miles traveled (VMT) has soared as consumers have benefited from more disposable income. At the same time, steady improvements in sales-weighted fuel economy that the country saw after 2007 have reversed course over the past couple of years.

There have been signs of weakness in the gasoline market, but given the perfect storm of relatively low pump prices, limited gains in fuel economy, and stable economic growth, the U.S. could burn even more gasoline in 2017.

One bright spot amid the continued rise in demand is the firm increase in electric vehicles sales. So far, however, that has not been enough to make a major dent in consumption. Furthermore, even though VMT is climbing sharply, fuel consumption has not risen at the same rate, thanks to fuel efficiency gains made from 2007-14.

The final annual number from the EIA comes in higher than expected. In its latest monthly forecast, the government agency had predicted consumption of 9.29 mbd for 2016, with this year seeing the same average. Last year at this time, the EIA pegged gasoline consumption at 9.23 mbd for 2016. The EIA has continually revised its demand estimates upward for the past year. So far in 2017, there have been signs of weakness in the gasoline market, but given the perfect storm of relatively low pump prices, limited gains in fuel economy, and stable economic growth, the U.S. could burn even more gasoline in 2017.

ADD A COMMENT