High gasoline prices at U.S. filling stations may be leading some of the nations motorists to drive less and use more efficient cars, energy experts said Wednesday.
Demand growth for gasoline in the worlds largest energy consumer has ground to a virtual standstill, surprising analysts that had expected it to rise on the back of a recovering economy and the arrival of summer vacation season.
"Were seeing something of a response to higher gas prices," said Tim Evans, analyst at IFR-Pegasus. "My guess is this is an indication of some effort to conserve, cut miles, slow down, take the family sedan instead of the Land Rover."
Implied gasoline demand over the past four weeks has averaged 9.2 million barrels per day (bpd), according to the U.S. Department of Energy, up only 0.1 percent from last year when rainy weather on the East Coast crimped vacation plans.
The near-stagnant growth in gasoline consumption comes in the midst of soaring pump prices, which earlier this month hit a nationwide record average over $2.00 a gallon. Gasoline prices have since eased to around $1.90, according to government and industry surveys.
"Clearly consumption hasn't been growing. Are people driving less, or are they driving differently? It is perhaps a bit of both," said Justin McNaull, spokesman for the AAA motorist and travel association. "We may see people taking shorter driving vacations this summer and leaving the SUV in the garage."
Summer driving
Travel surveys released in late May by the AAA and the National Retail Federation were mixed on whether strong gasoline prices would affect driver demand this summer.
The AAA survey predicted a record start to summer road travel, with continued high demand through August due to economic growth, while the NRF said about 32 percent of consumers were rethinking summer travel plans and considering shorter trips.
Driving demand typically fires up in late May, the traditional start to summer driving season, when road trippers take to the highways in greater numbers. U.S. drivers can account for roughly 12 percent of global energy demand during the summer.
"I don think the economy is quite as strong as everyone thinks it is," said Sarah Emerson of Energy Security Analysis Inc. "On the margin of the market there is some reduction in discretionary demand."
Experts have said that other factors may be magnifying the appearance of low demand growth from drivers, including the possibility that fuel distributors are selling down their own storage tanks after having stocked them up this spring. When distributors sell down their own inventories, they tend to draw less from commercial stockpiles.
"The fact that were seeing slack demand growth leading up to the July 4 holiday would indicate that distributors are comfortable with what they have," said Evans. "Now perhaps they are only replacing what is actually being consumed. But that still fits with the idea of slow demand growth from drivers."
The U.S. Energy Information Administration, the DOEs statistical wing, said on Wednesday the steep decline in demand growth over the past four weeks cuts a stark contrast from growth rates earlier this year of 3 or 4 percent.
"Preliminary weekly statistics on May 2004 gasoline demand, in particular, have evoked concern that growth has slowed much more than expected, presumably due to the lagged effects of very high prices," the EIA said.
The EIA added that if demand growth rebounds to expected levels later this summer it could put additional strain on the nations stockpiles, requiring "not only continued strong domestic production, but also significant quantities of gasoline imports.