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MEMORIAL DAY GAS DEMAND WAS A BUST: We might need to pump the brakes on marking the return of driving in America.
Drivers did not jam the roads on Memorial Day, according to early data compiled by GasBuddy.
Gasoline demand in the U.S. on Memorial Day was actually down 0.5% from the previous Monday.
The period of Thursday through Monday saw gasoline demand fall 1.34% from the same period a week before.
“Given the status of re-openings, to see such soft demand data after weeks of growth was a surprise,” said Patrick De Haan, an oil and refined products analyst for GasBuddy. “I’d have expected the holiday would have acted as a catalyst, but it did not.”
The stagnation in gasoline demand contradicts anecdotal evidence and other data tracked by companies like Apple on mobility trends that suggests driving is starting to return to normal levels.
“Gasoline demand is nowhere near normal and likely just registered 25-35% below last year,” De Haan told Josh.
This occurred despite the national average price for a gallon of gasoline being below $2 per gallon for Memorial Day weekend for the first time since 2003, according to AAA. National pump prices are $1.96 per gallon on average as of Monday, higher than $1.89 from a week ago but down from $2.83 a year ago.
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BUT….PANDEMIC WON’T BRING PEAK OIL DEMAND, IEA CHIEF SAYS: Global oil consumption has yet to peak despite expectations by some analysts and climate activists that the pandemic has permanently altered the long-term outlook for oil, according to the head of the International Energy Agency.
“In the absence of strong government policies, a sustained economic recovery and low oil prices are likely to take global oil demand back to where it was, and beyond,” IEA chief Fatih Birol told Bloomberg for a story posted this weekend.
Birol noted that behavioral changes that might emerge from the pandemic are both positive and negative for oil demand and could cancel each other out.
“People are working from home more, but when they do travel, they are more likely to be in cars than public transport,” he said. “Videoconferencing will not solve our energy and climate challenges, good government policies might.”
Follow the numbers: Global oil demand is not expected to reach pre-pandemic levels before the end of the year, the IEA projected last month. But after that, it expects oil demand to experience “robust” growth to 2025, absent major changes in government policies, before seeing slower growth and reaching 106 million barrels per day in 2040. The world consumed 100 million barrels per day of oil before the pandemic.
If you missed it: The expected demand recovery, combined with the shutting down of existing oil production and curtailed new investment, is setting the table for a price boom in the future, Josh wrote earlier this month.
MORE SIGNS CHINA’S DEMAND RECOVERY IS REAL: China’s oil demand will recover to 13 million barrels per day in the second quarter of 2020, 16% higher than the first quarter of this year, the research group Wood Mackenzie projected Monday.
That tracks with projections from IHS Markit, another research group, that said last week that China’s oil demand would reach 92% of its prior year level in May.
How China recovers is a crucial indicator of whether Birol’s expectations for the resilience of global oil demand prove true. China, where the coronavirus started, is the largest consumer of oil outside the U.S., consuming around 14 million barrels per day last year before the pandemic.
What’s happening now: After containment policies were lifted starting in April, Wood Mackenzie said, China’s gasoline demand is recovering quickly and is likely to return to last year’s levels by June. Diesel demand is also recovering, driven by industrial and road freight use.
“More people are returning to the office after a period of telecommuting,” said Wood Mackenzie research associate Yuwei Pei. “In addition, private car use is now seen as the safest mode of mobility, shifting passengers from public transport to private cars.”
On the other hand, China’s jet fuel demand will continue to fall for the rest of the year due to restrictions on international flights and passengers’ resistance to being in crowded places.
US OIL PRODUCTION TO BOTTOM OUT IN JUNE: U.S. oil production is set to reach its lowest level during the course of the pandemic, settling at around 10.7 million barrels per day in June, the research group Rystad Energy projected Tuesday.
That level would represent a two-year low, and it comes after U.S. oil output reached an all-time high of 12.9 million barrels per day in March. Rystad expects production to slowly recover this fall as companies begin to restore wells they shut-in, before ending the year in December at around 11.1 million barrels per day.
BIDEN OFFSHORE DRILLING BAN WOULD KILL 200K JOBS: Joe Biden’s proposal to ban new offshore oil and gas drilling in federal waters would cost nearly 200,000 jobs, strip the U.S. government of billions in dollars of revenue, and potentially push production to other countries, according to a new study commissioned by the industry’s trade group.
The study, released Tuesday by the National Ocean Industries Association, doesn’t name Biden but is intended to underscore the potential consequences of his proposal to prevent the U.S. government from issuing new oil and gas drilling permits in federal waters, which had experienced record oil production before the coronavirus halted demand.
In 2019, offshore oil and natural gas industry, directly and indirectly, supported roughly 345,000 jobs in the U.S., a number that the study projects to increase to 370,000 jobs on average between now and 2040, absent new policy. The industry study, produced by Energy and Industrial Advisory Partners for the National Ocean Industries Association, projects average employment to decline to 179,000 jobs under a permitting ban.
Biden’s official campaign plan says that he would “ban new oil and gas permitting on public lands and waters,” which appears to mean he would stop the government from issuing approvals for drilling through the duration of a lease, even if the lease was issued before Biden took office.
AUTOMAKERS TO DEFEND TRUMP FUEL ECONOMY RULE: The Alliance for Automotive Innovation, which represents all major car manufacturers that sell in the U.S., filed Friday to intervene in a challenge brought by the Competitive Enterprise Institute against the Trump administration’s fuel economy standards.
CEI is arguing the Trump administration should have gone further to weaken the standards, sticking with the freeze it had originally proposed. The auto industry trade group says it supports standards that increase in stringency year-over-year. The Trump administration finalized a 1.5% year-over-year improvement (compared to the nearly 5% year-over-year improvement required by the Obama administration’s rule).
“Despite calls by interest groups for flat standards, our members are committed to increasing standards that support investment in vehicles that improve fuel efficiency, and that balance affordability, safety, and the environment,” said John Bozzella, head of the auto group, in a statement.
As it stands now, the auto group is fighting efforts to further weaken the standards: But that won’t be the case forever. The guaranteed challenges from opponents, including a California-led coalition of states, arguing the Trump standards are much too weak just haven’t been filed yet. The motion signals the auto group could defend the Trump administration’s rule from those challenges, too.
But not every automaker is agreeing to defend the Trump rule: Six companies — Honda, BMW, Ford, Mercedes-Benz, Porsche, and Volkswagen — aren’t participating in the motion to intervene, according to a news release. Four of those companies have publicly sided with California in the fuel economy fight.
PARSING THE EMISSIONS BENEFITS OF ELECTRIC CARS: Policymakers could be dramatically overstating the greenhouse gas savings of electric car subsidies, according to a new working paper circulated by the National Bureau of Economic Research.
That’s in large part because the emissions savings of electric cars depend on what electricity source is charging the vehicles, according to the research from economists at the University of California Davis. If an EV is powered by natural gas generation, for example, “the implied CO2 emissions savings would be overstated by roughly six times,” the economists found. If the electricity source powering the EV is 50% natural gas and 50% renewable energy, the emissions savings would be overstated by 50%, they add.
Another factor causing policymakers to overstate the emissions savings of EV subsidies, the researchers say, is consumers who utilize the subsidy program were already likely to buy more fuel efficient cars. The working paper studied consumers in California.
BIOFUELS PRODUCERS CALL ON EPA TO REJECT ‘GAP YEAR’ WAIVER REQUESTS: Any requests the EPA has received from small refiners to exempt them from prior years of the Renewable Fuel Standard are attempts to “backfill lapses in extensions of exemptions” in order to get around a recent court ruling, the Renewable Fuels Association wrote in a letter Friday to EPA Administrator Andrew Wheeler.
The 10th Circuit’s ruling would sharply limit the EPA’s ability to issue small refinery exemption waivers, though the agency has said it will wait to implement the ruling nationally until any potential appeals are resolved. But, citing testimony from Wheeler and Energy Department Under Secretary Mark Menezes, the renewable fuels group says the EPA has received waiver requests from small refiners for previous years of the RFS program.
The group says it is “utterly preposterous” the EPA would consider those requests and asks the agency to “expeditiously deny” them. “[T]hese refiners are attempting to rewrite history in a cynical attempt to maintain an illegally exploited compliance loophole,” the letter reads.
The Rundown
Wall Street Journal Second fuel tankers from Iran arrives in Venezuela
Bloomberg Oil’s sudden rebound is exposing the achilles’ heal of shale
Reuters ‘This could be the one that gets me,’ says oilfield service veteran
New York Times Reduce demand for electricity leads to power giveaways
The Atlantic Revenge of the Obamacrats
Bloomberg Environment Energy companies reap tax breaks as they brace for virus impact
Associated Press Judge nixes bid to stop coal sales that Trump revived
Calendar
TUESDAY | MAY 26
The House and Senate are out.
