The Car Is Staging a Comeback, Spurring Oil’s Recovery

May 11, 2020

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(Bloomberg/Yahoo! Finance) ... Gasoline demand is rebounding, suggesting that the car -- at least for now -- is making a comeback. As lockdowns ease and parts of the world reopen for business, driving has emerged as the socially distant transportation mode of choice and is offering some near-term relief to an oil market fresh off its worst crash in history and reeling from an unprecedented collapse in energy demand.

“People are using more their cars because they are afraid to use public transportation,” Patrick Pouyanne, the chief executive of French oil giant Total SA, said.

It’s too soon to say whether this change is permanent. In some parts of Asia that reopened earlier than the rest of the world, people are venturing back onto trains. And it’s unclear whether global gasoline demand will ever fully recover.

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It’s a phenomenon that may begin to reverse the dramatic reductions in air pollution the world’s busiest cities have seen in recent months as travel and industrial operations ground to a halt.

In Berlin, among the first European cities to relax its lockdown, public transit use remains down 61% while the number of people driving has recovered to 28% below normal normal, according to data from Apple Inc., which tracks request for directions on its popular Maps app.

Apple Maps data for 27 world cities shows that driving directions are recovering more quickly than directions for mass transit.

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In the U.S., gasoline consumption is clawing back from record lows, rising by 400,000 barrels a day during the week ended May 1. Cities in Florida, one of the first American states to re-open, has seen fuel sales rebound to 30% below normal levels, from 50% weeks ago, according to the Florida Petroleum Marketers Association.

“I think maybe we will get a third of gasoline demand back relatively easy,” said Patrick DeHaan, an analyst at GasBuddy. The rest will come back much more slowly, he said, perhaps taking a year or more. Some demand may never return.

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In the U.S., demand for long-haul recreational vehicles has picked up as people opt for road trips over air travel. Jon Gray, chief executive officer of RVshare, said bookings in some areas have more than doubled compared with last year. “We saw an almost overnight doubling of bookings” as lockdowns showed signs of ending, he said.

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Amid the post-lockdown revival of the car, electric vehicles are likely to be left on the sidelines as a struggling economy and cheap gasoline stifles demand for cleaner-burning autos. Even under the most optimistic scenario, worldwide sales growth this year will barely exceed 2019, according to BloombergNEF. Depending on how the pandemic plays out, the outlook is even bleaker.

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Still, a look at cities that were early to re-open suggests that the spike in driving will be short-lived.

In Seoul, software developer Kim Jingi drove to work for a month and half after restrictions eased, in an effort to self-isolate. But for the last two weeks, Kim has returned to the subway.

“I thought it was safe enough,” Kim said. Also, “it was hard to find a parking spot.” READ MORE

Oil price boom expected following pandemic crash (Washington Examiner)

Daily on Energy: Why pump prices on Memorial Day could rise (Washington Examiner)

Americans Are Pumping Gas Again as States Reopen: Fuel makers see gradual recovery in demand as coronavirus restrictions ease, but they warn the next months could be tough (Wall Street Journal)

ETHANOL DEMAND SEEMS TO BE TURNING A CORNER (Brownfield Ag News)

Road Trips Expected to Boom This Summer: When Americans vacation post-pandemic, they will likely jettison air travel for motor vehicles. (NACS)

Demand for Gasoline Rebounds: Traveling by car is an easier way to maintain social distance than flying or taking a train. (NACS)

BP chief sees risk of oil demand passing peak as pandemic hits (Financial Times)