The Car and Truck Fleet and Leasing Management Magazine

Drop in U.S. Gasoline Demand Won’t Bring Lower Pump Prices

December 21, 2010

NEW YORK - After seven decades of mostly uninterrupted growth, U.S. gasoline demand is at the start of a long-term decline as cars and trucks become more fuel-efficient, the government mandates the use of more ethanol, and people drive less. By 2030, Americans will burn at least 20-percent less gasoline than today, experts say, even as millions of more cars clog the roads, reported the Associated Press.

Government and industry officials - including the CEO of Exxon Mobil - say U.S. gasoline demand has peaked for good. It has declined four years in a row and will not reach the 2006 level again, even when the economy fully recovers.

Americans are burning an average of 8.2 million barrels - 344 million gallons - of gasoline per day in 2010, a figure that excludes the ethanol blended into gasoline. That's 8 percent less than at the 2006 peak, according to government data.

But while America's diminishing demand will temper global demand, it will be more than offset by rapidly growing demand in China, India, the Middle East, and Africa. As a result, declining U.S. gasoline demand will not bring lower pump prices, according to AP.

The decline is expected to accelerate for several reasons.

  • Starting with the 2012 model-year, cars will have to hit a higher fuel economy target for the first time since 1990. Each carmaker's fleet must average 30.1 mpg, up from 27.5. By the 2016 model year, that number must rise to 35.5 mpg. And, starting next year, SUVs and minivans, once classified as trucks, will count toward passenger vehicle targets.
  • The auto industry is introducing cars that run partially or entirely on electricity, and the federal government is providing billions of dollars in subsidies to increase production and spur sales.
  • By 2022, the country's fuel mix must include 36 billion gallons of ethanol and other biofuels, up from 14 billion gallons in 2011. Put another way, biofuels will account for roughly one of every four gallons sold at the pump.
  • Gasoline prices are forecast to stay high as developing economies in Asia and the Middle East use more oil.

Demographic factors will also play a role, reported AP. Baby boomers will drive less as they age. The surge of women entering the work force and commuting in recent decades has leveled off. And the era of Americans commuting ever farther distances appears to be over. One measure of this, vehicle miles traveled per licensed driver, began to flatten in the middle of the last decade after years of sharp growth.

The shift from SUVs began in 2004 and has saved Americans $15 billion on gasoline this year, according to the National Resources Defense Council. By 2020, improved fuel economy is expected to lower annual carbon dioxide emissions by 400 billion pounds, the equivalent of taking 32 million cars off the road.

In reality, there will be 27 million more cars on the road - a total of 254 million - a decade from now, according to government projections.

Worldwide oil demand will hit a record 88.3 million barrels per day next year, according to the consulting firm Wood Mackenzie, as reported by AP.


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