Doom and gloom about oil supply problems has quickly been replaced by worries about U.S. petroleum demand. Traders and analysts need to replace the traditional calculus by which they measure balanced supply thanks to some unprecedented drops on the demand side.
Gasoline consumption as reported by the Department of Energy is down by a staggering 6% from the previous year. Because of population growth and new drivers it is generally accepted that demand should rise by at least 1% every year.
Most analysts believe that a decline of this magnitude is more indicative of a fragile economy rather than a concerted effort by government and consumers conserving fuel. This will be the first year in the past 15 where demand has fallen. Past years have seen an average gain of about 1.5%.
Gasoline prices have fallen by 25 cents per gallon in the past 30 days and are off by more than 75 cents from the record high set in July. Everyday this year the national average for regular unleaded has been more expensive than the previous year, but that is set to change soon.
Wholesale spot price (where oil companies trade bulk cargos of fuel) at the Gulf Coast have dropped by 50 cents per gal between October 1 and October 8. Most experts are predicting that the national average will be below $3.00 per gallon before the end of the month.
Although most fleet managers were rooting for cheaper prices, the cost appears to be less commerce as consumers cut back and business leaders wrestle with the credit crunch.
