As officials relax social distancing policies, government data show a strong recovery in U.S. gasoline demand through mid-June, and experts say the health of the broader economy will govern the next leg of demand growth.
According to the U.S. Energy Information Administration, demand bottomed at 5.1 million barrels per day in the week to April 3, a 48.3% decline from the same week in the previous year. Two and half months later, the EIA pegged gasoline demand at 8.6 million bbl/d, 9.1% below the year-ago level.
"The steady growth in gasoline demand in the face of still high levels of unemployment suggests that discretionary driving rather than work-related driving has largely been responsible for the recovery," S&P Global Platts Analytics wrote in a June 24 report. The analysts said that mobility data from Apple and INRIX show that increases in discretionary trips are slowing and that "a full recovery of demand must await an economic recovery strong enough to boost employment."
As COVID-19 lingers, it could present an obstacle to that recovery. While S&P Global Ratings now expects the U.S. economy to contract less than it projected in April, it expects it will take two years for the economy to return to its end-of-2019 level, with the recovery taking hold in the third quarter, absent a second wave of COVID-19 cases strong enough to force the return of lockdown measures.
As cases spike in parts of the country, some governors are facing pressure to slow or reverse the easing of social distancing measures.
In a June 24 report, Clearview Energy Partners said three states — California, Texas and Florida — accounted for 40% of the nation's 148,414 new COVID-19 cases over the five days through June 23. According to the firm, they consume more than 27% of the gasoline sold in the U.S. and account for more than 28% of the nation's GDP.
In response to the spike in cases, Texas governor Greg Abbott on June 26 announced he would rollback the state's reopening plans. "As I said from the start, if the positivity rate rose above 10%, the State of Texas would take further action to mitigate the spread of COVID-19," he said in a statement.
In a June 24 news conference, California Governor Gavin Newsom gave no indication that he would slow efforts to reopen the state's economy, arguing prioritizing public health and economic health "is not a binary choice."
To date, Florida Gov. Ron Desantis has not backtracked on a June 11 decision to continue relaxing social distancing rules.
S&P Global Platts and S&P Global Market Intelligence are both owned by S&P Global Inc.