Processing Magazine

Oil industry braces for drop in U.S. thirst for gasoline

April 13, 2009
According to the Associated Press, a growing number of industry players believe that America’s gas-gulping era is over. 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. The reasons include changes in the way Americans live and the transportation they choose, along with a growing emphasis on alternative fuels. The result could be profound transformations not only for the companies that refine gasoline from crude oil but also for state and federal budgets and for consumers. Much of contemporary America, from the design of its cities to its tax code and its foreign policy, is predicated on a growing thirst for gasoline. As Americans commute less, use more fuel-efficient cars and take more public transportation, gas stations have shut down. There are 11% fewer places to pump gas in the U.S. today than there were a little over a decade ago. Right now, the recession is curbing U.S. gasoline-consumption, as laid-off workers stop commuting and budget-conscious families forgo long road trips. Many industry observers have become convinced the drop in consumption won''t reverse even when economic growth resumes. In December, the U.S. Energy Information Administration said gasoline consumption by U.S. drivers had peaked, in part because of growing consumer interest in fuel efficiency. Declining gasoline-tax revenue is forcing local and federal governments to search for new sources of funding. Oil refiners, which for decades focused on bringing U.S. drivers more gallons of gasoline, are retooling their businesses. Oil companies are beginning to invest in biofuels and battery technology. Diverse trends are adding up to a steady drain on gasoline demand. Gasoline engines are being designed to burn fuel more efficiently. Hybrid and other advanced-technology vehicles that minimize gasoline usage are joining the nation''s fleet. Tanks of gasoline and diesel fuel are being leavened with increasing amounts of biofuel, now made mostly from corn but in the future also from perennial grasses and municipal waste. President Barack Obama''s pledge to end the "tyranny of oil," and a push for energy efficiency and biofuels in recent legislation, could accelerate these trends. Skeptics of the notion that gasoline demand has peaked point to a population that is likely to keep growing as Americans have children at roughly the same pace and the flow of immigrants increases. Lower gasoline prices are back after a multiyear spike in prices. That could reignite consumers'' desire for big, fuel-guzzling SUVs and tolerance of long commutes, especially when the economy strengthens.