Experts Predict Long-Term Slackening of U.S. Gas Demand

NEW YORK -- The nation’s thirst for gasoline is shrinking as cars and trucks become more fuel-efficient, the government mandates the use of more ethanol and people drive less, according to an Associated Press report that also predicts Americans will burn at least 20 percent less gasoline by 2030.

"A combination of demographic change and policy change means the heady days of gasoline growing in the U.S. are over," said Daniel Yergin, chairman of IHS Cambridge Energy Research Associates and author of a Pulitzer Prize-winning history of the oil industry, in the AP report.

According to the AP, government and industry officials -- including the CEO of ExxonMobil -- say U.S. gasoline demand has peaked for good. It has declined four years in a row and will not reach the 2006 level again, even when the economy fully recovers, said the report.

Americans burnt an average of 8.2 million barrels -- 344 million gallons -- of gasoline per day in 2010, a figure that excludes the ethanol blended into gasoline. That's 8 percent less than at the 2006 peak, according to government data.

The report lists several reasons why the decline in volume will continue:

-- Starting with the 2012 model year, cars will have to hit a higher fuel economy target for the first time since 1990. Each carmaker's fleet must average 30.1 mpg, up from 27.5. By the 2016 model year, that number must rise to 35.5 mpg. And, starting next year, SUVs and minivans, once classified as trucks, will count toward passenger vehicle targets. In addition, the auto industry is introducing cars that run partially or fully on electricity while the federal government provides them subsidies to increase production of these vehicles.

-- By 2022, the country's fuel mix must include 36 billion gallons of ethanol and other biofuels, up from 14 billion gallons in 2011. Biofuels will account for roughly one of every four gallons sold at the pump.

-- Gasoline prices are forecast to stay high as developing economies in Asia and the Middle East use more oil.

There are demographic factors at work, too. Baby boomers will drive less as they age, women are no longer entering the workforce in droves, and Americans are no longer driving as far to work. One measure of this, vehicle miles traveled per licensed driver, began to flatten in the middle of the last decade after years of sharp growth, said the report.

The report acknowledges there are scenarios that, while unlikely, could temporarily delay the long-term trend. If the U.S. economy booms and global oil prices fall, demand for gasoline could rise.

America's diminishing demand will be more than offset by rapidly growing demand in China, India, the Middle East and Africa. As a result, declining U.S. gasoline demand will not bring lower pump prices.

Worldwide oil demand will hit a record 88.3 million barrels per day next year, according to the consulting firm Wood Mackenzie.

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