The Peak Oil Myth

[ThatHawaiiGuy]

Increases in Gasoline Consumption Are Kept to a Minimum by Recession


http://online.wsj.com/article/SB122895520588496473.html?mod=googlenews_wsj



DECEMBER 10, 2008, 9:25 P.M. ET


By ANA CAMPOY

U.S. gasoline consumption is showing a glimmer of strengthening now that prices at the pump have tumbled to levels not seen since 2004.

New data show that demand for the fuel ticked up week over week for the second week in a row. Christmas already is a typically heavy driving time, and the lower prices might encourage consumers to travel. Still, energy experts predict there will be no sizable rebound in gasoline consumption until the economy perks up.

Gasoline demand edged up almost 1% last week from the previous week, according to a U.S. Energy Department report Wednesday. It was still 3.6% lower than last year, according to weekly data, but the drop was less severe than the average year-over-year declines of 3.8% in October and 4.2% in September.

Another indicator, the SpendingPulse data based on gasoline-station purchases compiled by MasterCard Advisors, showed that consumers pumped 0.3% more gasoline last week than in the same period last year, the first time that has happened since April.

The improvement, though, is minimal considering the dramatic drop-off in gasoline prices. The national average price for a regular gallon has collapsed by almost 60%, to $1.68 a regular gallon Wednesday from a peak of $4.11 a gallon in July, according to data from the auto group AAA.

"You would expect to see a huge increase in demand," said Doug MacIntyre, an energy analyst with the U.S. Energy Information Administration. "The reason you don't see it is simply the economy."

Lackluster gasoline demand will help keep oil prices low, bringing relief to consumers, retailers and industries that burn up large amounts of oil-based fuels. Crude-oil futures rose 3.5%, or $1.45 a barrel, to $43.52 Wednesday on the New York Mercantile Exchange.

As the holidays approach, it will become clearer how cash-strapped consumers are. Usually, shopping and travel inflate gasoline consumption by about 100,000 barrels a day from November to December, Mr. MacIntyre said. This year, however, the agency is predicting that consumption will decline by an average 20,000 barrels a day during that period. It also is forecasting that demand will remain lower year over year in 2009.

The nation's retailers will derive some benefit from lower gasoline prices as consumers are freed to spend a little more with the money they are saving on gasoline, said Bill Martin, co-founder of ShopperTrak RTC Inc., which monitors shopper behavior. His company expects holiday retail sales, excluding gasoline, to rise 0.1% from last year -- the smallest increase in years.

Lower oil prices are also a break for chemical makers that use oil-based raw materials. They saw profits squeezed when crude was more than $100 a barrel. Now, though, the recession has reduced demand for their products and sharply cut into their sales.

Write to Ana Campoy at [e-mail]