With the upcoming Labor Day weekend marking the end of the peak driving season in the United States, it is a good time to review recent trends in U.S. gasoline consumption, which accounts for about 10 percent of total global oil demand. The U.S. Energy Information Administration (EIA) data indicate gasoline consumption in the first six months of 2011 was 2 percent lower than in the same period in 2010. Economic growth, gasoline prices, and vehicle fleet efficiency are three key determinants of gasoline use. Economic growth and prices impact vehicle miles traveled, while fleet efficiency, which changes only slowly based on efficiency of new vehicles relative to the efficiency of the existing fleet and the rate of fleet turnover, links miles traveled to fuel use. Higher gasoline prices in 2011 compared to the same period in 2010 appear to be the main driver behind the recent drop in gasoline demand. The impacts of increased economic activity and increased vehicle efficiency, which move gasoline demand in opposite directions, were each about half the size of the impact of higher prices, and taken together the two effects were largely offsetting.
In May 2011, when prices eclipsed $4 per gallon in some areas of the country for the first time since August 2008 (though the national average price topped out at $3.97 per gallon), questions regarding the robustness of U.S. gasoline demand moved to the foreground. After a significant decline in 2008 brought about by rising prices and economic recession, gasoline consumption stagnated. June 2009 marked the first time in 21 months that U.S. gasoline consumption posted growth relative to the year-earlier monthly level. Notwithstanding a soft patch in the first quarter of 2010, gasoline consumption averaged growth of about 35 thousand barrels per day (bbl/d), or 0.4 percent relative to the year-earlier monthly level from June 2009 through the end of 2010, with growth particularly strong in the third quarter of 2009.
As crude oil prices rose following their sharp decline from July to December 2008, so too did gasoline prices. Retail prices for U.S. regular-grade gasoline rose from a low of $1.61 per gallon at the end of December 2008 to $3.05 per gallon at the end of December 2010. By late 2010, U.S. gasoline demand growth had begun to weaken. November 2010 consumption showed a 90 thousand bbl/d decline relative to the year-earlier monthly level; since then, gasoline consumption has shown year-over-year declines in 7 of the last 8 months.