Thursday was is the first official day of summer, which ushers in high season for the travel industry. Normally, demand for gasoline grows as road-tripping families fill up their tanks. But even though gas prices are cheaper this year than last, people are just not buying fuel like they used to.
The U.S. is the No. 1 market for gasoline in the world, but Tom Kloza, analyst at energy price data firm OPIS, said demand has been slogging along.
“There’s no question, people aren’t feeling it,” he said.
Especially middle- and lower-income people. Because while gas prices may be lower, “hotel fees and eating out is so expensive that you can save 10 cents on gasoline, but it’s not going to make a difference to your lifestyle,” he said.
While some may be sensitive to travel costs, there are also fewer gas guzzlers on the road, Kloza said, so each gallon is going farther.
“The efficiency of the fleet is really having an impact out there,” he said.
And some travelers aren’t using gasoline at all to get around.
“The slowing of U.S. demand for gasoline is due to the substitution effects from choosing air travel or choosing to travel on the road with [electric] or more efficient vehicles,” said Amelie Carlton, an economics lecturer at Rice University.
And with the flexibility of working from home, not as many people are driving into the office. All of which eases pressure on gas prices.
“The refineries ramped up production expecting increased demand over the summer,” said Carlton. “Their expectations have not been met with the demand from the American consumer. As a result, higher supply and lower demand have led to lower prices at the pump.”
As for U.S. refiners, many of which are concentrated on the Gulf Coast, economist Jesse Thompson of the Dallas Federal Reserve said they are in a better position to deal with a lackluster gasoline market than those in Europe and Asia.
“So if the demand here is weak and margins are in negative or very low or very, very low territory abroad, then I would expect you to see those refineries abroad cut run rates first,” he said.
And cutting their production would make more room for refiners in the United States to ship gasoline abroad.
