After a year of setbacks for the oil market, American drivers are underpinning the first rebound in gasoline demand since the pandemic began that is likely to stay.
Retail gasoline sales rose last week to 1% of year-ago levels just before regional lockdowns brought fuel consumption to a crawl, Patrick DeHaan, head of petroleum analysis at GasBuddy said on Twitter. With the rate of new coronavirus infections falling to a record low last week and the vaccination effort ramping up, this latest demand rebound comes with a lower threat of yet another wave of infections than before.
The U.S., which consumes more gasoline per capita than any other nation, is a linchpin in the global oil market recovery. Stakes are sky high for the global oil industry that has been battered over the last year by the demand fallout. The timing couldn’t be better for fuel makers that rely on the busy summer driving season to buoy profits and have struggled with weakest seasonal consumption in more than 20 years since last spring.
Demand “will continue to improve with warmer weather and reopenings and things getting back to normal, coupled with pent-up demand.,” said Trisha Curtis, chief executive officer at oil analysts PetroNerds in Denver. “We definitely see some bright spots with vaccine uptake.”
Green shoots for oil are emerging elsewhere as well. Industrial output in China surged in the first two months of the year, underscoring its rapid economic rebound and country processed more than 14 million barrels a day of crude int he first two months of the year. In the U.S., air passenger numbers hit a 12-month high on Friday.
Still, the recovery is just beginning. Restrictions on schools and businesses in vary regionally and one off events such as last weekend’s blizzard in Colorado and Wyoming that triggered power outages and force flight cancellations. Many businesses such including BP Plc will allow office staff to continue to work from home two days a week throwing into question if U.S. gasoline demand will see a full recovery this year.
“Broadly speaking, gasoline demand remains 10-20% lower compared to pre-pandemic levels,” Matt Price, vice president of petroleum pricing and analytics at national fuel retailer Pilot Corp., said in an email. “Some pockets of the country, such as Florida, have seen demand for gas recover fully over the past year, while others, like Illinois, still see decreased demand.”
The four-week average for gasoline demand as tracked by the Energy Information Administration was more than 1 million barrels a day below the same time a year ago for the week ended March 5.
“Gasoline demand is still well off its pre-Covid highs, even though it has seen a remarkable recovery,” Curtis said.