Decades from now, observers will reflect on key statistics, such as unemployment and GDP, and note how numerous conditions in 2020 hit unfavorable records. In a year full of extremes, this week’s post reviews what we consider to be the most interesting – and insightful – chart of 2020: U.S. gasoline consumption.
U.S. Gasoline Consumption
Each week the U.S. Energy Information Administration (EIA) reports the amount of motor gasoline supplied. This measure is informally referred to as “gasoline consumption,” as it is an implied measure of consumption.
Figure 1 shows the weekly data for 2020 (in yellow), along with the five-year weekly range (in blue), and the five-year weekly average (in gray). Off to a strong start, weekly gasoline consumption during the week of March 13 was 9.7 million barrels per day, a record level of activity that week. However, the wheels quickly came off as the pandemic spread and social distancing measure went into effect. Within three weeks, implied gasoline consumption fell to 5.0 million barrels per day, the lowest level of activity for that week in 29 years.
Consumption began to recover in late April before stalling around 8.7 million barrels per day in late June and July.
Figure 1. U.S. Weekly Supplied Motor Gasoline (Implied Consumption). Data Source: EIA.gov and aei.ag calculations.
Why Gasoline Consumption is Relevant in 2020
While versions of Figure 1 have been widely circulated in recent months, it is essential to consider why these data are so relevant. First, the data are very timely and robust. There are not many publicly available, economy-wide data series reported weekly since 1991. Additionally, the data are reported within a few days of the week ending.
Second, the nature of the pandemic and social distancing makes weekly gasoline consumption a valuable proxy measure of economic and social activity.
Finally, gasoline consumption data is relevant to ethanol blending, ethanol production, and corn usage. Ethanol can only be blended into the gallons of gasoline consumed.
In short, there aren’t a lot of weekly data series that provide insights into the U.S. economy and usage of corn.
Always Learning
Throughout the Spring, there were many hopes of a V-shaped recovery and pent-up demand headed into the late Summer. With this in mind, the Ag Forecast Network posted two questions about the recovery in gasoline consumption. The first was the probability of weekly gasoline consumption exceeding 9 million barrels per day before the end of August. This represented a return to something approaching normal (see Figure 1). The second question was about gasoline consumption experiencing the upward draft of pent-up demand and the probability of consumption exceeding 10 million barrels per day.
Figure 2 plots the consensus average of users for these two questions. From Figure 1, you can see that gasoline consumption did exceed 9 million barrels per day in mid-August. Still, that observation turned out to be a bit of an anomaly as consumption retreated in the subsequent weeks. This is an “always learning” moment for users as the outcome was heavily affected by the luck of a single observation late in the forecast period. That said, what can we learn?
First, the much-hoped-for V-shape recovery has failed to materialize. Second, gasoline consumption has mostly stabilized around 8.7 million barrels per day since June. Finally, the gasoline-related headwind for ethanol and corn usage will continue into the 2020/2021 marketing year.
Figure 2. Ag Forecast Network Consensus of U.S. Gasoline Consumption. Data Source: AEI.ag Ag Forecast Network.
Considering the 2020 Impacts
There are two additional graphs to consider the current gasoline consumption situation. Figure 3 shows the annual average of weekly supplied gasoline since 1993. For 2020, weekly implied consumption has averaged 8.1 million barrels per day, well below the 9.3 million barrels per day observed in 2018 and 2019. Additionally, the last time weekly consumption was at 8 million barrels per day was in 1997.
Second, Figure 4 shows that gasoline consumption in recent weeks has been equal to nearly 90% of the five-year average. More specifically, the average for the last four weeks was 92%.
Figure 3. Annual Average of U.S. Weekly Supplied Motor Gasoline, 1993-2020. Data Source: EIA.gov and aei.ag calculations.
Figure 4. 2020 Weekly U.S. Weekly Supplied Motor Gasoline as Share of 5-Year Average, 1993-2020. Data Source: EIA.gov and aei.ag calculations.
Wrapping it Up
Given the extent of social distancing, weekly implied gasoline consumption has been an insightful metric. In addition to a proxy measure of economic and social activity, the measure also provides insights into the ethanol production and corn usage unknowns in agriculture.
While consumption has recovered significantly from the March lows, the recovery has been stalled around 90% of the five-year average. The implications are that 1) the V-Shaped economic recovery did not materialize, 2) economic and social activity remains sluggish, and 3) the 2020/2021 corn marketing year will be affected, in some manner, by reduced gasoline consumption and associated ethanol usage. While the worst may very well be behind us, it’s a very open question about how gasoline consumption – and the economic recovery – will unfold over the next 12-18 months. As seen in figure 3, the last economic contraction – The Great Recession – corresponded with a multi-year contraction in U.S. gasoline consumption.
Channeling the World’s Most Interesting Man, we’ll leave you with this: “stay curious, my friends.”