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.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.