Fall in petrol use in gas-guzzling US heralds shift for global markets

The gas-guzzling heyday of the world’s largest oil market is receding as more efficient cars, the arrival of mass-market electric vehicles and the rise of working from home prompt US motorists to burn less petrol.

The 8.78mn barrels a day of petrol consumed in the US last year was 6 per cent lower than record volumes sold before the coronavirus pandemic. Consumption will continue to decline in 2023 and 2024, the US Energy Information Administration forecast on Tuesday.

US petrol accounts for about 9 per cent of global oil use. The prospect of stagnant or falling demand holds broad implications for energy markets and carbon emissions.

“The consensus is we are not going to get back to pre-Covid levels of consumption,” said Robert Campbell, head of energy transition research at consultancy Energy Aspects. “That matters because US gasoline is the world’s largest single market for an oil product. It dwarfs any other national gasoline market in the world.”

Petrol consumption has been lower year on year in every month since June, driven in part by a burst of record high fuel prices after Russia launched its full-scale invasion of Ukraine.

US motorists are driving slightly less than before the pandemic. Vehicle miles travelled — a measure of road traffic volumes — were about 90 per cent of early 2020 levels in January, according to Inrix, which tracks mobility data.

The decline is largely due to less driving in cities, where working from home remains popular. About half of US employees in jobs that could be carried out remotely were working on a hybrid basis last year, according to a recent Gallup poll. Miles travelled in San Francisco were still less than 60 per cent of pre-Covid-19 levels last autumn, Inrix data showed.

“Travel patterns have changed,” said Bob Pishue, transportation analyst at Inrix. “The closer you are to dense urban cores, the less travel there is.”

More important, the fuel economy of cars increased on average by about a third — or 6 miles a gallon — between 2004 and 2021, according to the Environmental Protection Agency, driving down associated carbon emissions by a quarter. The gains came in the wake of stricter regulations imposed by the administration of Barack Obama. Joe Biden’s administration has tightened them further.

“Fuel economy, every month, every year has been getting more efficient,” said Jeff Barron, a petroleum analyst at the EIA. The statistics agency’s long-term outlook to 2050 does not foresee petrol consumption returning to pre-pandemic levels.

Better efficiency in the road fleet will in 2023 avert more than 150,000 b/d of petrol demand growth in OECD countries in the Americas, of which the US is by far the biggest oil consumer, the International Energy Agency said. What it called “burgeoning sales of electric vehicles” will save roughly another 50,000 b/d.

“The heyday of gasoline is over,” said Alan Struth, an analyst at S&P Global Platts.

US oil refiners have acknowledged the trend. Marathon Petroleum recently estimated consumption was off by 3 per cent from pre-Covid-19 levels, a level that was “probably pretty sticky”, Brian Partee, the company’s senior vice-president, said recently.

But refiners and many analysts believe that demand will still grow for other petroleum products. One area of focus is the petrochemical sector, where cheap electricity gives the US a big advantage over other parts of the world.

“In the aggregate, total US [oil] demand doesn’t look like it’s peaked,” Struth said. “It’s close; It’s getting there; and it will, probably by the time you look at ‘25 or ‘26.”

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