Here's Why U.S. Gasoline Consumption Won't Be Bouncing Back Anytime Soon
Investing.com | Jul 23, 2020 05:28AM ET
The expectation that gasoline demand will rise and return soon enough to pre-coronavirus levels in the United States is simplistic at best.
The truth: the situation with gasoline demand in the US does not look optimistic. After months of disruption, it may be a while until real recovery sets in, given the several complicating factors behind continued low numbers.
Pandemic lockdowns in mid-March and April took a heavy toll on gasoline demand. With nearly every state urging residents to stay home and some even attempting to mandate lockdowns under threat of force, in addition to school and business closures, gasoline consumption plummeted by as much as 50% between the beginning of March and the beginning of April.
By mid-April, when stay-at-home directives were relaxed, some Americans started driving again, and gasoline demand began to climb, steadily improving weekly throughout May and June.
Many analysts took this as a good sign, looking at data showing rising refinery utilization, Layoffs at large companies are just beginning, and with many school districts deciding against holding in-person classes, gasoline demand will not get nearly as big a boost as it should from commutes to school and work. On top of the functional results of closures, there is the impact of fear on the population that prevents summer travel, commerce and public interaction.
Recessions are not kind to gasoline demand, and this recession will be combined with the ongoing psychological paralysis that has many Americans terrified to leave their homes even to drive to the grocery store.
Some gasoline demand will return as the rate of infection slows in the major driving states, but by then, the hit from the recession will be in full swing. Market watchers must take into account the possibility that current levels of US gasoline consumption are about as good as they’re going to get for the rest of 2020, and factor that into considerations of oil price movement.
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