The US Energy Information Administration’s (EIA) short term forecasts of gasoline consumption, which cover the current and upcoming calendar year, have risen over the past year. The latest Short Term Energy Outlook (STEO), released yesterday, expects 2014 gasoline consumption to be 8.82 million bpd (135.2 billion gal.), 0.13 million bpd (2 billion gal.) higher than last November’s forecast, which was close to the average 2014 consumption forecast across the 12 editions of STEO published in 2013.
The STEO forecast of 2014 gasoline consumption was generally declining between January 2013 and September 2013, but has risen over the past year. The STEO estimates are used by industry as an indicator of market conditions and provide the starting point for EIA’s longer term projections. The latest available STEO forecast is also the source for the estimates of gasoline demand that EIA provides the US Environmental Protection Agency (EPA) for its use in operating the Renewable Fuel Standard program as required under the Energy Independence and Security Act (EISA) of 2007.
Updates in the gasoline consumption forecast reflect changes in a number of key factors, such as gasoline prices, economic and employment trends, weather, demographics, changes in consumer behaviour patterns, as well as new data on actual consumption.
A comparison of the current STEO to the September 2013 edition shows only a 3 cent/gal. difference in the forecast for average gasoline prices. However, the latest forecast for the average unemployment rate in 2014 is 6.3%, well below the 7.3% year ago forecast, while the forecast for average non-farm unemployment in 2014 increased by 1 million over the same interval.
Over time, EIA’s gasoline forecasts for 2014 have increasingly reflected current gasoline consumption data from EIA’s Petroleum Supply Monthly (PSM). The PSM measures product supplies, which is used as a proxy for consumption. EIA’s latest forecast now has the benefit of monthly data for the first half of the year. However, the largest data driven upward revisions to the 2014 gasoline consumption forecast data occurred late in 2013, before any 2014 data were available. During the first quarter of 2013, gasoline consumption increased by only 6000 bpd over the same period during 2012. But the fourth quarter of 2013 year over year increase in gasoline consumption had risen to an average 320 000 bpd.
This increase in consumption did not persist for too long. During the first quarter of 2014, consumption averaged 66 000 bpd higher than the same period in 2013. (The Federal Highway Administration reports a similar increase of 62 000 bpd for the first quarter of 2014). During the second quarter of 2014, consumption began to show year over year declines in May and June, with an average increase for the period of 20 000 bpd. EIA expects continuing year over year declines during the second half of 2014, averaging 79 000 bpd.
The general outlook for motor gasoline is for declining consumption as average new vehicle fuel economy continues to improve. As new cards replace less efficient older cars, the increase in the average fleet fuel economy is expected to outpace the growth in the driving age population and vehicle miles travelled and put continuing downward pressure on gasoline consumption.
Adapted from a press release by Emma McAleavey.
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