Amid renewable fuel switching and improving vehicle efficiency, the EIA is forecasting declines in gasoline demand not only for this year but also for next year. The declining forecast begs the question of whether US gasoline consumption has peaked, and a surprise slowdown last year indicates that demand may never return to pre-Covid levels. But lower demand doesn’t automatically mean lower prices.
The fuel industry is projected to reduce its supply faster than demand in the coming years, with more refineries closing or converting to smaller biofuel facilities. As a result of the mismatch, production crunches could occur for gasoline, prices could spike, or even limited outages could occur.
Oil refiners have taken this economic outlook to heart and have started planning their supply cuts to stay profitable ahead of declining demand. More than 1 million barrels a day of US oil refinery output have already been cut, which is about 5% of the US gross total. Energy Aspects forecast a decrease in gasoline consumption by 15% between 2022 and 2027, resulting in a total loss of 1.4 million barrels a day during that time.
Even if demand is peaking, this news does not mean that it is on a steady decline or that it’s an emergency. It remains unknown when the total switch to EV and renewable fuels will take place, and it could quite possibly be never. Gasoline-reliant vehicles will remain on the market for decades to come as consumers will stick to what they know and trust. In today’s market, EVs only make up 1% of vehicles found on the roads, and the switch could take decades just to replace half of the current gasoline-fueled cars.
Speaking of fuel reductions, a strike is brewing with France’s energy branch of the CGT union after it called for action beginning on Jan. 26. Discussions of a 48-hour strike and a 72-hour strike following the Feb. 5 EU sanctions are hot and heavy as protesters in the country have already scheduled a Jan. 31 labor union protests. Because of these political uproars, three refineries run by Total Energies SE have reported disruptions to their delivery of fuels.
Among the EU sanctions for Russian crude, four EU nations are also calling for zero emissions from heavy-duty vehicles to further meet their climate goals. The commission is scheduled to release freight transport regulations next month, which will tighten the net zero target for 2030. The group hopes to ban combustion engines beginning in 2035 but is trusting that manufacturers will cut emissions by at least 15% by 2025 and by 30% before 2030.