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Gasoline: U.S. And China Still Driving Demand Higher


Despite prognostications otherwise, gasoline demand in the United States and globally continues to grow. Lower gasoline prices combined with net additions to the global fleet of vehicles powered by gasoline mean that despite increases in sales of electric and hybrid vehicles, gasoline demand will likely continue to grow in absolute terms in the near future.

U.S. and Chinese Consumers Buying Bigger Cars

Low gasoline prices in the United States has not only induced demand growth at the fastest year-over-year rate in 14 years but also the highest increase in auto sales in more than 10 years. U.S. consumers are also electing to buy heavier SUVs so the new fleet mix demands relatively more gasoline than anticipated by analysts in the past.

While less robust than predicted prior to the recent Chinese economic slowdown, Chinese auto sales remain the highest volume of all nations. Chinese buyers have also elected to buy a greater percentage of SUVs and other heavier vehicles that use more gasoline relative to light weight passenger vehicles.

Chinese Vehicle Fleet Young And Growing

Growing from 2 million units in 2001 to over 23 million in 2015, the Chinese vehicle fleet is among the youngest in the world. As vehicle quality improves and a used car market grows, new vehicle sales are more likely to create a net increase in the size of the Chinese vehicle fleet, generating a rapid increase in long-term gasoline demand. Electric and hybrid vehicles are not popular with Chinese buyers and will likely remain a small percentage of net additions to the Chinese vehicle fleet for many years to come.

Emerging Markets And Global Growth In Middle Class Likely To Demand More Gasoline

Outside of China, emerging market vehicle sales have stabilized and may have resumed growth. Long-term and substantial growth in the global middle class consumer segment will likely increase global demand for gasoline for the near future.

Could VW Scandal Reduce Diesel But Increase Gasoline Demand?

The VW emissions scandal is causing vehicle emissions regulators globally to rethink the role of diesel fuel in the global demand mix. Prior to the scandal many analysts forecast robust diesel growth not only in passenger vehicle use but also for freight and construction vehicles. Given the high percentage of diesel passenger vehicles in the European Union, revised air pollution regulations could increase gasoline demand relative to diesel in the near future. Outside of the EU, diesel vehicle sales constitute a much smaller percentage of passenger vehicle sales, so even if the global fleet mix changes, the effect on gasoline sales will not likely be as significant.

Because diesel contains more energy per volume than gasoline, heavy freight trucks and construction vehicles are likely to be powered by diesel for the foreseeable future. Constructing the infrastructure necessary to sustain and grow the global middle class mean that diesel demand will likely increase even if the passenger vehicle mixes skews more gasoline-centric than forecast prior the VW scandal.

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Tom Morgan

Tom Morgan is an Analyst for Drillinginfo. He has 20 years of experience practicing law with a focus on advocating for public policy to advance energy security and private property rights. Tom received his law degrees from Georgetown University and American University law schools. He hosts the weekly Drillinginfo Energy Minute, and you can find and connect with him on LinkedIn as Tom Morgan.