US gasoline demand still growing despite prices

Reuters ^ | Thu Jun 22, 2006 2:13pm ET | Robert Campbell

[newgeezer]

NEW YORK (Reuters) — U.S. motorists may be complaining about higher gasoline prices this year, but they will still be pumping more gasoline than they did in 2005, extending a 23-year streak of rising gasoline demand in the world's biggest oil consumer.

Drivers in the United States used an average of 9.13 million barrels per day of gasoline last year, 11 percent of total world oil consumption, but only a modest 0.2 percent annual rise compared with normal increases of 1.5 to 2 percent, according to the U.S. Energy Information Administration.

The slowdown in demand growth is due to the rise in pump prices, which have surged since an active hurricane season in 2005 forced the closure up to 25 percent of U.S. refining capacity.

U.S. retail gasoline prices have averaged $2.31 per gallon in 2005, up from $1.90 in 2004, according to the EIA.

Gasoline prices are even higher this year, averaging over $2.90 since the end of April, but despite the rise in prices, gasoline demand is still growing.

Preliminary EIA data suggests that gasoline consumption has risen by 0.9 percent so far this year.

While EIA officials caution that preliminary data is often revised lower when more detailed monthly data becomes available, the EIA and other analysts are still predicting that gasoline demand will rise by at least 0.5 percent this year and could even reach 1 percent.

"I think June and July are in that range, with August maybe being slightly higher than 1 percent," said Doug MacIntyre, an EIA analyst.

Continued...

[newgeezer]

It's because we can't use less. We have no choice, and Big Oil knows it.</sarcasm>

[GBA]

The laws of supply and demand will work.

[VRWCmember]

Economic Ignorance On Display. Demand is not affected by price. Demand is the relationship between price and quantity demanded, so it reflects the quantity demanded at various prices. When demand shrinks or grows, it does so at all prices. In other words, if demand increases, the quantity demanded at every price increases. Therefore, a reaction to changing prices is simply a movement up or down the demand curve.

There are several factors that influence demand, such as (1) the number of buyers/consumers in the market, (2) changes in tastes and preferences or style, (3) price and availability of substitute or complimentary goods in the market, (4) changes in income and/or wealth that cause a shift in consumption choices, (5) seasonal considerations that influence consumption choices, (6) demographics, and other miscellaneous factors like regulation, taxation, etc that can influence consumption choices. These factors interact to cause consumption to increase or decrease and thus influence the quantity demanded at all prices.

[Red Badger]

If ya gotta go, ya gotta go!...........$5.00 per gallon by Labor day?.......

[BenLurkin]

related story: http://www.avpress.com/n/23/0623_s16.hts

[conservativehusker]

The Governor here in Nebraska just announced our gas tax will rise 1 cent /gallon because we have been using less her in the state and they need to make up for the shortfall of taxes...

[newgeezer]

Demand is not affected by price.

Hogwash. However, given the rest of your post, it seems a matter of semantics and/or definition of terms.

[msjhall]

US still having children (consumers)despite gasoline prices.

[msjhall]

Or better yet:

US still issuing new driver's licenses despite gasoline prices.

[GingisK]

The high gas prices just didn't seem to make my daily commute any shorter. Those prices didn't make Home Depot or Handy Hardware pack up and move closer to my home. I don't see anyone rushing out to build a commuter railroad system between my house and everywhere I need to go.

Just how is price supposed to affect the American infrastructure?

[newgeezer]

At the Fortune 500 company where I've worked for 20+ years, there are many more bicycles in the racks and motorcycles in the cycle lots this year than in previous years.

At any given time, there are more messages posted on the bulletin boards looking to form carpools than I've ever seen.

My family is much more conscientious about consolidating errands than before. I'm sure we're not alone in that regard.

It all causes me to believe some of us are trying to use less gasoline.

[GingisK]

It all causes me to believe some of us are trying to use less gasoline.

I certainly do, but the topology of Atlanta, where I work, and so on prohibits much savings. The places are where they are, and few people seem to work within a bicycle trip from home. Not only that, riding a bicycle during rush hour here is a sure-fire way of dying young.

[thackney]

but they will still be pumping more gasoline than they did in 2005, extending a 23-year streak of rising gasoline demand in the world's biggest oil consumer.

In 2005 we used less gasoline as a nation than we did in 2004. The first quarter 2006 values are less than first quarter 2004.

U.S. Motor Gasoline Supplied, EIA

[RipSawyer]

Hogwash. However, given the rest of your post, it seems a matter of semantics and/or definition of terms.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

I am still trying to figure out if he actually said anything and, if so, what was it he said. It sounds like just so much doubletalk to me. Pending further advisories I will second the Hogwash sentiment. I have actually washed a hog before so I know something about that.

[mysterio]

Additionally, Exxon is still at the top of the pension deficit list, despite record profits. That's more significant, IMHO.

[festus]

Think demands up just wait till next month when I drive a few thousand miles getting 8 mpg purely for the hell of it ( RV towing ).

[VRWCmember]

Hogwash. However, given the rest of your post, it seems a matter of semantics and/or definition of terms. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

I am still trying to figure out if he actually said anything and, if so, what was it he said.

When I see economic ignorance on display, I try to inform and educate. Contrary to the popular belief of the economically ignorant, neither demand nor supply changes in response to a change in price. Changes in demand and/or supply drive price changes; they do not result from them. If you can continue reading this before your eyes glaze over, I will try to offer some explanation of why this is true, with a little primer from a basic Economics 101 class.

Demand is the relationship between price and quantity demanded. The Law of Demand states that ceteris peribus, or other things being equal, if the price of a good increases then the quantity demanded of that good will decrease. Demand, or the relationship between price and quantity demanded, is represented graphically by the demand curve, which is a line represented the quantity demanded for the good at different prices. As market conditions drive changes in price, the quantity demanded will go up or down, even though demand itself hasn't changed. You are correct that it is a matter of semantics and/or definition of terms, but since words matter and meanings matter, when someone discusses economics or economic issues such as "demand" one should use those terms with their proper meaning and in their proper context or else one is simply spreading ignorance.

Here is a graphical representation of a change (increase) in demand:

In this example, we see that as a result of the increase in demand, at a price of $2.50, the quantity demanded increased from 40 units to 60 units. We would also see that with the initial demand curve, if the price increased from $2.50 to $3.00, the quantity demanded would fall from 40 units to approximately 30 units.

[SamAdams76]

Gas is going to eventually cost $10 a gallon. This will mean that we will pay between $150 and $200 on average to fill out tanks.

Look for gas siphoning crimes to increase.

[oceanview]

a colorful explanation, but you can't be serious.

the major factor at work here - 70% of gasoline is purchased by credit card. the increased costs of gasoline, are simply being rolled into consumers debt load - they are financing it, like they finance their other purchases, by the way they manage their credit cards.

want to see demand for gas drop in relation to higher prices (what should be happening) - ban credit card purchases for gas, cash or debit only. you'll see a 10-15% decline in demand within one month.

right now, a consumer spending $100 more per month on gas on their credit card - the true cost to them, is simply whatever the bump in their monthly payment is as a result of the extra $100 they are charging. the true effect of the run-up is gas prices, is being insulated to the consumer, by use of credit cards. so demand doesn't fall.

[JeffersonRepublic.com]

[The Governor here in Nebraska just announced our gas tax will rise 1 cent /gallon because...]...the price of gas is too expensive./sar