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.

Source TWIP EIA


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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Of gasoline demand and automobile fuel production.

It being a Wednesday, there is a new TWIP report out, and so we try and interpret what they had said and what it suggests for the future. At the same time the Federal Highway Administration have released the January driving figures, and what optimism was left about the economy is reduced a little.

So what am I talking about? Let’s begin with the weekly graphical plot for gasoline demand (from This Week in Petroleum where along with the current numbers it is possible to do some analysis.

Source EIA .

Now we’re squinting at the line to ensure that the red continues to increase, and with our remaining optimism, the end of the curve does seem to be tending back upward still. If it will only continue. But when we plot, for the past five years motor miles driven per month at this time, The conclusions are not pretty. Looking first at the January figures for the amount of miles driven, one can see the drop in the past year, against the rise in all but the year precious.

Monthly mileage driven in the US for periods of 6-months for the last 5 years (source DOT). The current line is obviously still heading down, and though leveling off, is not quite an optimistic projection as I had expected at the time.

What is then interesting is to look at the total accumulative miles driven over the period and suddenly you see the trend is still down even if slightly less so.

When we do a monthly plot with a rolling 12 month average, then we get another curve, and this suggests that while we might have dug our way out of this a little we have a long way to go.

Source FHWA Mileage driven by month since 1984 (Source FHWA).