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Thread: chart of the week - US Gasoline Consumption

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    Default chart of the week - US Gasoline Consumption

    for what it's worth ... from Charles Hughes Smith at


    (snip)this data is interesting because it is un-manipulated, that is, it is not "seasonally adjusted" or run through some black-box modifications like so much other government data.

    Retail gasoline deliveries, already well below 1980 levels, have absolutely fallen off a cliff. Is the plunge inventory-related, i.e. are storage facilities so full that retailers are simply putting off deliveries?

    Though I don't have data on hand to support this, I know from one of my correspondents who is in the gasoline distribution/delivery business that gasoline is very much a "just in time" commodity: gas stations are often close to running out of fuel when they get a delivery. Stations aren't holding huge quantities of surplus gasoline; that's not how the business works.

    Given the absence of "extra storage" in gas stations (and the fact that the number of gas stations has fallen dramatically since 1980), it is reasonable to conclude that retail delivery is largely a function of demand, i.e. gasoline consumption.

    Even if you dismiss the recent plunge as an outlier, the declines in retail gasoline deliveries are mind-boggling. If you look at the data from 1983 to 2011 on the link above, you will note that delivery declines align with recessions.

    For example, deliveries jumped from 50.1 million gallons per day (MGD) in November 1983, when the nation was emerging from the deepest postwar recession then on record, to 58 MGD the following November (1984).

    Deliveries steadily rose to a peak of 67.1 MGD in July 1998, declined marginally in the 2001-2 recession and then surged to 66.8 MGD in August 2003. If we just look at one month--say November--then we see that deliveries remained in a remarkably consistent channel from 1994 to 2008, between 54 MGD and 63 MGD, with the higher numbers occuring in the "peak bubble years" of 1998 and 2003.

    In 2010, gasoline deliveries declined to the low 40s--literally falling off the charts. In November 1983, deliveries were 51.1 MGD; in November 2010, they were 42.8 MGD, and in November 2011 they were 30.9 MGD."(snip)





    (snip)"There are no data-supported broad-based drivers for dramatically lower gasoline consumption other than austerity and lower economic activity. The code-word for "austerity and lower economic activity" that is verboten in the Mainstream Media is "recession." Indeed, if you examine the EIA data, the only causal factor that has backing in the data is recession--or if you prefer, austerity and lower economic activity.

    Then there is the price of fuel. People have to go to work, pick up the kids, get their meds, etc., and few urban centers in the U.S. have mass transit systems that are up to the task of replacing autos. So most Americans have what we might call non-discretionary driving. But as the price of fuel rises, people find ways to lower their discretionary driving by combining trips, shopping less often, shortening or eliminating vacations, etc. Enterprises reduce costly business travel with teleconferences and other digital technologies.

    Data supports the notion that high oil prices lead to recession. For example, Chris Martenson recently made a compelling case for this in Why Our Currency Will Fail ("Note that all of the six prior recessions were preceded by a spike in oil prices.")

    Household income doesn't rise just because oil is climbing in cost, and so the extra money spent on fuel is diverted from other consumption or saving (capital accumulation). Higher fuel costs lower household capital formation and reduce consumption/economic activity.

    Oil has been elevated for months, kissing $100 and rarely dipping below $90/barrel. Do higher oil costs explain the decline in gasoline consumption? Once again, they undoubtedly influence consumption, but that cannot explain the 40% drop in consumption. After all, when oil spiked in 2008 to $140/barrel, deliveries only dropped by a few million gallons: from 58.8 MGD in July 2007, before the spike, to 54.8 MGD at the point of maximum pain in July 2008.

    The cost of oil has declined sharply from mid-2008, yet consumption has tanked from 54.8 MGD in July 2008 to 42.4 MGD in July 2011. That's a hefty 21% decline.

    What other plausible explanation is there for the decline from 42.4 MGD in July 2011 to 30.9 MGD in November 2011 other than a dramatic decline in discretionary driving? That 27% drop in a few months in unprecedented, except in times of war or sharp economic contraction, i.e. recession.

    If we stipulate that vehicles and fuel consumption are essential proxies for the U.S. economy, then we can expect a steep decline in economic activity to register in other metrics within the next few months.

    Such a sharp drop would of course be "unexpected" given the positive employment data of the past few months. But as the data above shows, employment isn't tightly correlated to gasoline consumption: gasoline consumption reflects recession and growth.

    In other words, look out below."(snip)


    While I 'snipped out' the author's analysis disproving any major correlation between US employment levels and US gasoline consumption, and while I didn't include supplementary information from other sources the author mentioned in his article, the basic 'postulate' seems to be this. US retail gasoline delivery volumes appear to be a de-facto measure of actual US economic activity. As such, and because of the 'just in time' nature of US retail gasoline distribution and sales eliminating 'time lags' in reporting and accounting, US retail gasoline delivery volumes can be used as a valid 'leading indicator' compared to other forms of measuring US economic activity ! And those US retail gasoline delivery volumes have 'fallen off a cliff' during the past couple of months.
    Last edited by Melonie; 02-12-2012 at 07:11 AM.

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