Fuel for America's transport needs

When groups such as OPEC try to predict the future demand for oil and petroleum products, one of the significant factors in that analysis lies in the demands of the US transportation sector. I have intermittently tracked those numbers, through the Vehicle Miles Travelled plot which the FHWA publishes each month, and here is the latest plot, which includes figures through last November. Bear in mind that this is a rolling 12-month total of miles travelled.

12 month rolling total of vehicle miles travelled in the USA (FHWA )

It is becoming increasingly evident that the plot has returned to a steady increase that has now been sustained at about the same rate as being maintained up to the earlier peak.

The question now comes, as evidenced by the remarks of London’s Mayor, as to how much higher the price of gasoline/diesel fuel will rise before it, once again, has an impact on overall growth. Overall growth was around 1.1% in November, up more than the annual average increase of 0.7%.

Driving is, to an extent, seasonally controlled, as this plot of the last three years driving, by month illustrates.

Travel on US Urban Highways by Month (FHWA)

Thus the bitter cold and poor driving conditions of the last couple of months may have had a negative impact on the overall totals, moving forward from the end of the plot, yet overall the recovery seems to be being well maintained.

This return to a higher level of demand is the subject of the front page comment on This Week in Petroleum which the EIA issued today (Wednesday). They note that transportation accounts for 72% of US petroleum consumption, at 12.9 mbd out of the current national total demand of 18 mbd. In the latest Energy Outlook the EIA has projected that GDP will grow steadily at 2.7% over the next 25 years, including a steady growth in transportation fuel use.

DOE projections for energy distribution (Energy Outlook )

As an aside it is interesting to note the EIA comment:

Although the situation is uncertain, EIA’s present view of the projected rates of technology development and market penetration of cellulosic biofuel technologies suggests that available quantities of cellulosic biofuels will be insufficient to meet the RFS targets for cellulosic biofuels before 2022, triggering both waivers and a modification of applicable volumes, as provided in Section 211(o) of the Clean Air Act as amended in EISA2007. The modification of volumes reduces the overall target in 2022 from 36.0 billion gallons to 25.7 billion gallons in the AEO2011 Reference case, equal to the AEO2010 Reference case.5

Well I don't think that is much of a surprise. In regard to more conventional ethanol production, it appears to have reached a current plateau at 0.9 mbd.

Turning to the more usual look at the charts, the anticipated decline in demand over the quarter has led to a drop in refinery activity.

Refinery inputs (EIA)

However the production of crude dropped even faster:

US crude oil production (EIA)

The difference has come from increasing imports. We will see whether this is a transient or more permanent change.



Retail gas prices now average $3.11 per gallon in the US (locally we are still hovering around $3.00), still a fair way below the $7.75 of the UK, but one wonders whether the steady ramp up in price will continue for another year or so, and if it does, what the consequences will be.