Fuels demand projected to increase, although less than 2019

The US Government’s Energy Information Administration (EIA) released their take on how gasoline and diesel demand might recover in their Short Term Energy Outlook (STEO) this week. The forecast shows that gasoline demand will increase in 2021 to levels above the low set in 2020; however, that it will not climb above 2019 levels until sometime after 2022 (if ever). Of course, we would expect ethanol demand to closely follow this same shape as it follows the upper blending volume percentage limit.

I did do a quick calc last week and estimated that we would need around 15-20 million commuters returning to work (based on average commute distances and average MPG) to close the gap, and in that context I can see why there might be a little pessimism in the demand recovery shown here.

US Gasoline Consumption with Summer Averages

Figure 1:Gasoline consumption forecast recovers to a level short of 2019. Source: EIA

In terms of distillate demand, they seem to paint a bit rosier picture, perhaps factoring in the effect of an ambitious infrastructure plan being floated in the US. Distillate demand is already comparable to previous seasons and is projected to increase above that in the coming seasons.

Figure 2: Distillate consumption forecasted to recover then grow. Source: EIA

The other elephant in the room when talking about distillates is Jet. There are some good signs that the additional travel I mentioned in the March update is coming to fruition. The table below shows how much better we are doing than 2020, yet how far we must go to get to 2019 levels of air travel. There is even the talk of bringing back furloughed pilots and staff by airlines. As I mentioned in the previous update, I am still doubting a full recovery in Jet given how business travel will forever be changed by this pandemic and sudden shift to remote video calls for meetings that used to be in-person.

TSA Checkpoint Travel Numbers

Figure 3: Air travel is up 14x of last year, but still only 60% of what it was in 2019. Source: TSA

While the mogas and jet demand pictures are still giving us a little pause, we do see distillate demand as a bright spot. It is really anybody’s guess as to how much commuting and business travel bounce back, but I think we have seen a pretty strong recovery in personal travel and even commuting so far.

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