More stringent ethanol-blending rules for gasoline, which require annual increases in the dilution of vehicle fuel, and ongoing economic uncertainty were cited as reasons for the lowest US gasoline demand in nine years.
Gasoline demand totaled 8.179 million b/d during the week ended January 6, Energy Information Administration data released Wednesday showed, down 377,000 barrels, or about 4%, from the week prior but, more striking, the lowest level since February 2003.
During the first week of February 2003, gasoline demand was 8.106 million b/d.
Consultant Andy Lipow, of Lipow Oil Associates, called the demand destruction for gasoline "amazing" in the face of a stabilizing economy and warm weather nationwide that would encourage driving.
"Demand continues to be on a decline," he said. "It's accelerated through the year which is quite perplexing in light of the unemployment rate going down. ... You would think the economy is stabilizing and is improving but actually demand is declining."
He noted that it has been consistently declining 4.5% on a year-over-year basis throughout 2011.
"One week, you think it's wrong, but five months, un-uh, it's real," he said.
Lipow cited possible reasons: less driving as some of the jobless give up on trying to find work, more people buying diesel-powered cars or hybrids and improvement of fleet mileage.
Another market source said "the number can be misleading, but consumers are definitely affected by the rise in prices" at the margin.
"Other than that it's simply the economy," the source said.
One Gulf Coast analyst, who asked not to be named, added that the introduction of mandated ethanol into the gasoline pool has lowered demand.
"I think you've got more gasoline throughout the country that is being blended with ethanol," he said.
Each year, the US Renewable Fuel Standard has called for a higher amount of ethanol to be blended into the gasoline pool. At present, gasoline makers blend up to 10% of ethanol into their gasoline blendstocks for supply to consumers, although the Environmental Protection Agency allows up to 15% of ethanol to be blended.
