Gas Prices Rise, Remain Below Year-ago Levels

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Gas Prices Rise, Remain Below Year-ago Levels

NEW YORK -- Although a national survey released Sunday reported U.S. gasoline prices rose nearly 10 cents a gallon during the past three weeks, many industry experts, including executives at ExxonMobil, believe the era of gas consumption growth in America is over.

Fuel price analyst Trilby Lundberg reported the average U.S. price of regular grade gasoline was $2.05 per gallon Friday, up from $1.95 per gallon March 20, according to an Associated Press report. However, that price was still down $1.27 from the price of gasoline at this time last year.

According to the report, the lowest price was in Newark, N.J., at $1.83 per gallon; the highest was in Anchorage, Alaska, at $2.40 per gallon.

As the current recession is curbing U.S. gasoline consumption, a growing number of industry players are saying the era of car-loving Americans gulping ever-increasing volumes of gasoline is over, according to a report by The Wall Street Journal.

Among those who say U.S. consumption of gasoline has peaked are executives at the world's biggest publicly traded oil company, Exxon Mobil Corp., as well as many private analysts and government energy forecasters, reported the Journal.

They cite changing consumer transportation habits and a growing emphasis on alternative fuels for contributing to what could be a profound transformation for the companies that refine gasoline and the state and federal budgets that rely on fuel tax revenues.

Much of contemporary America, from the design of its cities to its tax code and foreign policy, is predicated on a growing thirst for gasoline, said the Journal.

Drivers consumed 371.2 million gallons of petroleum-based gasoline every day in 2007, according to the U.S. Energy Information Administration (EIA), which expects usage to fall 6.9 percent to 345.7 million gallons in 2009, as demand at the pump declines and the use of plant-based ethanol increases. Even if usage climbs after the recession ends, it won't exceed 2007 levels, according to EIA forecasts.
Demand for all petroleum-based transportation fuels—gasoline, diesel and jet fuel—fell 7.1 percent last year, according to the EIA—the steepest one-year decline since at least 1950.

And many industry observers believe the drop in consumption won't reverse even when the recession ends. In December, the EIA said gasoline consumption by U.S. drivers had peaked, in part because of growing consumer interest in fuel efficiency.
According to the Journal, Exxon believes U.S. fuel demand to keep cars, SUVs and pickups moving will shrink 22 percent between now and 2030. "We are probably at or very near a peak in terms of light-duty gasoline demand," said Scott Nauman, Exxon's head of energy forecasting.

The decline in consumption would also impact local and federal governments, which would have to seek new sources of funding.

The Journal article pointed out other trends that are draining gasoline demand. Among them:

-- Today’s gas engines are designed to burn fuel more efficiently.
-- Hybrid and other technology vehicles are joining the nation’s auto fleet.
-- More biofuels are being added to current gasoline blends.
-- Demographic shifts, such as more Americans living in cities and relying on public transportation or shorter commutes, is reducing demand.
-- President Obama put energy efficiency and biofuels on his list of key legislative initiatives. The 2009 economic stimulus law includes large new loan guarantees to help renewable-energy businesses get financing—and provides huge incentives for oil companies to dive in, too. Most big oil companies are expanding their push into alternative fuels.
Not everyone agrees with this scenario, though. Tom Kloza, chief analyst at Oil Price Information Service (OPIS), located in Wall, N.J., said population trends point to increased energy consumption in the future. "Anyone who looks at population must think there is going to be some big bird flu if they think we've peaked," said Kloza.

In addition, lower gas prices now might reignite demand for fuel-guzzling SUVs, said others. After the 1979 spike in crude-oil prices, U.S. gasoline consumption dropped for four years, but then rose again when fuel prices plummeted in the mid- to late-1980s, the Journal pointed out.

And, in China and other parts of the developing world, passenger-vehicle fuel demand is expected to triple by 2030, according to ExxonMobil.

Federal gasoline-tax revenue fell 3 percent last year, according to the Department of Transportation. This, plus other tax shortfalls, left Congress having to plug an $8 billion hole last year in the Highway Trust Fund, previously kept flush by growing gasoline use, according to the article.

To continue raising funds as biofuels and other types of fuel replace oil-based gasoline, Congress and some states are even considering basing taxes on the number of miles people drive rather than how many gallons they pump, said the Journal.

Related articles:

-- Weighing the Impact of Ethanol Use -- April 13, 2009

-- Oil Rises with U.S. Spending -- April 12, 2009

-- Rex Tillerson: ExxonMobil to Invest $129B in Five Years -- April 8, 2009