The network TV news broadcasts this week are in a lather about the rising pump price of gasoline, which has been creeping up steadily for the last few weeks ahead of the usual seasonal surge. Already it appears we’re heading for record pump prices this summer—maybe reaching $5 a gallon in some high cost states. All of the usual reasons are in play: the price of oil stuck stubbornly around $100 a barrel or higher, uncertainty in the Middle East, sustained demand from China, and the recovering U.S. economy. But there is one aspect of this story that is still incongruous: gasoline consumption in the United States appears to be sharply lower over the last few months—at least if you go by the Energy Department figures on retail gasoline deliveries (a close proxy for overall gasoline consumption) shown in Figure 1. In fact, the trend of the last couple of years shows a sharp break with the relatively stable trend of the last 25 years. What’s going on?
You might think if demand is dropping the price would be flat or falling. Or perhaps the falling deliveries of gas is why prices are rising, except there’s no indication that gasoline supplies are tight right now, unless you buy one of the always-discredited conspiracy theories that the fossil fuel industry is manipulating the market. Higher fuel economy of the surface fleet (hybrids, Chevy Volts, etc) probably can’t explain the magnitude of this trend. A number of observers think it is possible that this sharply declining trend is another indicator that the economy is heading down again. (Charles Hugh Smith offers still more interesting analysis here.)
Source: Energy Information Administration