Wednesday, April 15, 2009

TWIP in mid-April

After the excitement of the two days in Washington last week at the EIA Energy Conference, we are now returned to casting our eyes over the entrails of The EIA’s This Week in Petroleum. Interestingly this week thy are playing the same sort of forecasting game that I have been trying to achieve with the looks at how gasoline sales are developing, as they relate to vehicle miles driven and whether, looking at historical trends, we can expect demand to start to rise.

The EIA view is that, all things considered, they anticipate a 1% increase in demand for gasoline this summer. This is significantly less than the usual seasonal trend, but to get to any increase all they had to anticipate that the continued low price for gasoline will be the major driver, against the still declining economy. When we look at the gasoline demand curve, it is remaining remarkably flat (well, OK a tiny rise), and has now dropped below last year’s levels, which were at this point rising quite steadily.


Driving up through Central Missouri today, the trees were beginning to green up, the redbud was still out, and the sky was blue. A lovely day, which used to be sufficient to justify a pleasant spring drive. Pure pleasure driving is less in fashion these days, except for those with a new vehicle, but as long as prices stay down (and ours are still below $2) I will anticipate that gasoline use may pick up a little more than the EIA predict, stocks have, for example, stopped increasing.

We shall see! On another front today was the last day to file taxes. (And of course we will gloss over some who might have waited until the last minute).

It did get me thinking about the evolving discussion on tax and the fossil fuel industry. It is not that long ago that there was concern over the windfall profits that some of the larger companies were making as oil and gas prices rose. There is now some talk that those days may return soon for those in the palm oil business. However it is happening in Malaysia, and may not last more than two months.

But that again assumes that there is a stability in demand against supply, in the case of palm oil there is a likely increase in production to be anticipated, that may reduce prices. There has been a promise that gasoline taxes (per se) wouldn't be increased in the current Administration. Presumably a lot of road repairs etc can be paid for through the stimulus packages. There remain arguments, however, for an increase in gasoline taxes.

We are going to remain a nation of drivers into the foreseeable future. We will need highways and roads, to get around on, and somewhere those maintenance costs have to be met.

It will be interesting to see, where, down the road, that money is generated.

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