As President (Joe) Biden is reminding everyone who will listen, gasoline prices in the United States have been falling for 50 days straight.
A debate has been raging over exactly how much demand for gasoline has fallen, but it certainly appears to have been one of the weakest driving seasons ever.
Now, as prices fall, the question all analysts are asking themselves is whether demand will bounce back, sending gasoline prices soaring again.
President Biden recently boasted on Twitter that gasoline prices in the United States have been falling for 50 days straight, noting this was the fastest decline in a decade.
The President added a sort of infographic to his tweet informing us that 50 percent of gas stations sold gasoline for $3.99 or less a gallon. What he forgot to mention was that demand for gasoline has been behaving very unnaturally for this time of year.
Standard Chartered this week released a commodity alert that said that this year, driving season in the U.S. never really materialised. The report noted substantial demand declines for both June and July, adding, however, that the recent price decline should result in a pick-up in demand this month.
There has been a lot of talk about the cure for higher oil prices being higher prices still. It appears this might have happened in the U.S. as prices for gasoline earlier this year hit the highest level in several decades. And the national average is still above $4 per gallon, maccording to AAA.
No wonder then, with inflation raging on, people are opting not to drive, which is affecting demand.
According to StanChart data, in July, gasoline demand in the U.S. dropped by 7.6 percent on the year to 8.592million barrels daily, which, the report noted, was the lowest demand level since 1997 except for the lockdown-heavy 2020.
The Energy Information Administration, however, had a different data interpretation. According to that interpretation, the above gasoline demand figure was as much as 1million bpd lower than demand during the lockdown-stricken July of 2020.
Bloomberg’s observation about gasoline demand trends made a splash on Twitter, prompting a lot of analysts to weigh in on the discussion of whether it is possible that this year’s driving season could have been worse for gasoline demand than the lockdown summer of 2020.
Different datasets were noted in the debates, such as GasBuddy’s, which reported a slight increase in demand last week, for example. GasBuddy’s Patrick DeHaan noted the different methodologies of measuring demand and one very, perhaps the most, important difference in these methodologies.
The EIA uses what it calls implied demand or, per its report, “product supplied” by refiners to fuel retailers, while GasBuddy works with the amount of gasoline actually sold by fuel stations.
Some accused the EIA of skewing the numbers. Others noted that the weekly numbers for demand are flawed and that errors have been made in the past, too, leading to the wrong estimate for July demand.
While the debates continue, one thing nobody is arguing about is that U.S. drivers are driving less, and even the 50-day straight price decline has not been enough to motivate them to start driving more, that during the season when everyone travels more, normally.
The StanCart analysts noted in their report that “The average US price of retail gasoline has fallen by more than USc 80 per gallon (16%) since the mid-June peak, which should support demand in August.
“However, we think the theory that the US market will bear gasoline prices of USD 5 per gallon for an extended period has now been tested to its destruction.”
Indeed, whether or not demand for gasoline was lower this July than in July 2020 is not as relevant as the answer to the question of why, despite such a stable and continued decline in prices, Americans are not driving more.
The most obvious answer would be, of course, inflation. Economists, government officials, and journalists are debating the definition of recession, whether or not the presence of a recession on the United States’ books isrelevant to anything, and whether the current situation is not a masked form of economic growth.
In the meantime, the actual prices of actual goods and services are rising. As prices rise, consumption begins to dip. The longer prices rise, the more consumption would dip unless income is adjusted accordingly, which doesn’t seem to be happening yet.
Gasoline, as a fundamental commodity that pretty much everyone uses in one form or another, is no exception. May and especially June saw all-time highs in gasoline prices.
It was a matter of time before these record-high prices began to hurt demand, leading to lower consumption and, consequently, lower prices.
It is, therefore, questionable how much credit for the 50-day price decline in gasoline the Biden administration could reasonably claim. They did not exactly open more refineries or stimulate more oil drilling – and even if they had, it would have taken time to get that new production to the market.
It was largely marketforces that led to the lower prices. And also to lower consumption that may or may not have been even lower than consumption during the lockdown summer of 2020. Now, with prices lower, demand will very likely start picking up, as suggested by GasBuddy’s real-life data.
The more important question then would be how long it will be until prices start climbing up again amid extra-strong exports of both gasoline and diesel.
Slav reports for Oilprice.com
TCN Assures Energy Delivery To Nigerian Homes
Nigerians have been assured of adequate and efficient supply of electricity to their homes.
The General Manager, Transmission Company of Nigeria (TCN), Maiwada Sarki Bello Paiko, gave the assurance during a media chat with newsmen at the dam site in Shiroro Hydro Electric Power station, Shiroro Local Government Area, Niger State, recently.
Paiko stated that since TCN took over the affairs of transmission, the company had done well in procuring power for onward delivery to consumers.
According to him, as a private organization, TCN would not compromise on standard, noting that the company was working 24 hours to ensure steady and adequate energy.
He said, “TCN has been working round the clock to fix the aging equipment in order to avoid disruption in the daily transmission of energy.
“The company in collaboration with the World Bank had constructed a new 132 KV from Zungeru power station switch yard to Tegina, new control rooms at Shiroro, replaced over aged equipment at Jebba transmission station, and upgraded Minna sub- station with additional 132/33 KV 100MVA transformer”.
He further disclosed that during the period under review, TCN has made landmark achievements by decommissioning, installing and commissioning new six 330KV current transformer on bus coupler at Jebba T/S in January, 2023, as well as new 330KV circuit breaker on Jebba-Kainji.
While noting that there is no business without challenges, Paiko enumerated some of the challenges confronting the organization to include insecurity along Shiroro-Kaduna 330KV Lines, Shiroro-Kamtapa 330KV line, Gwagwalada 330KV line, Shiroro-Tegina 132KV line, redial nature of Shiroro-Tegina-Kontagora-Yauri line, among others.
He hinted that plans were at advance stage for the construction of additional 330KV line from Shiroro-Kaduna and PLAN Turn -IN-TURN-OUT at Tegina T/S.
Paiko attributed the successes recorded during the period under review to the unflinching support of the President Bola Tinubu led federal government and the management of TCN in the provision of an enabling environment for officers to operate.
Crude Oil Theft: Illegal Connections Hit 4,800 – Kyari
Group Chief Executive Officer, Nigerian National Petroleum Company Limited (NNPCL), Mele Kyari, has said there are over 4,800 illegal connections on crude oil pipelines in the Niger Delta region.
Kyari, who described oil theft and vandalism in the region as a calamity, warned that this could frustrate the projections of the Federal Government.
Speaking when he appeared before the Senate Committee on Appropriation on the proposed budget for 2024, in Abuja, Friday, Kyari said the daily oil production would depend greatly on the security situation in the oil rich region.
He said, “the situation we have in Niger Delta in terms of security is a calamity. We don’t have that anywhere in the world. To engage non-state actors as last resort as solution is abnormal. But we have to respond abnormally.
“You have over 4,800 illegal connections on our pipelines. That means, within every kilometer, you have an insertion. Even if you seal all the insertions, you can’t get what you want in terms of production.
“In the Niger Delta, people are coming from all parts of the country to do illegal refining. That’s why we engage locals to deal with it. We will contain this challenge. We are doing everything possible to restore sanity. What is happening is a colossal damage to the environment and the host communities”.
Kyari welcomed the projection of daily crude oil production of 1.78 million barrels at $77 per barrel of crude, explaining that OPEC restriction to a daily production of 1.5 million barrel does not affect condensates, which he said fetches Nigeria plenty of money.
According to him, Port Harcourt refineries would come on stream in December while Warri Refinery would resume production in first quarter of 2024, giving December 2024 as production target of the Kaduna Refinery.
Kyari disclosed that the entity would have liquidated as the company’s cash flow could no longer sustain the burden of the subsidy regime, but for the quick and bold intervention of President Bola Tinubu to terminate the fuel subsidy regime saying, “i will advise that we stick to the submission of Mr. President on the quota
“There is no way we will get crude oil less than $70. Once economies are growing, there will be sustained demands for crude oil in our country and other countries. The estimates supplied by Mr. President is realistic.
“When we say production, we mean total production of crude oil and condensates. So we combine condensates and crude oil as total marginal production. So we know our estimates is realistic. There is no curtailment on condensates from OPEC”.
Kyari further gave an update on the Turn Around Maintenance of the nation’s four refineries.
Hydrogen In The Limelight At COP28
The UN’s COP28 climate talks, a mega-conference running for two weeks, are organized around daily themes. The fifth day on Tuesday, last week, focused on energy and brought out much high-level discussion of hydrogen.
The high hopes for green hydrogen were apparent at last year’s COP27 summit in Egypt with a flurry of big project announcements. Those have faded from the news as few major projects have reached financial commitment.
Yet the seriousness of discussions in Dubai this week, pursued by top ministry officials and high-level executives, showed that the momentum toward green hydrogen continues to quietly build.
This year’s conference lacks the flashy announcements, but it is moving forward with putting the basic structures in place to support a future hydrogen economy.
COP28 is showing that, while a viable market for ‘green’ hydrogen still appears far from a ‘tipping point’, the ongoing activities of companies and governments is a growing force.
A ‘High-Level Ministerial-CEO Roundtable on Hydrogen’ convened on Tuesday, sponsored by the COP28 President’s Office, with two hours of talks that cumulatively felt like a hydrogen wave.
Ministers from numerous countries described their governments’ initiatives and financial support. An official from the US DOE spoke about $7bn for seven selected ‘hydrogen hubs’, also money for electrolysis development, and a hydrogen tax credit that can extend for up to 10 years at $3 per kilogram.
Then, top executives of some 15 companies, members of the Hydrogen Council, spoke of their already significant investments in the emerging sector.
Executives from Air Liquide, Air Products, Hy24, Masdar, Next Era Energy, OCI Global, Port of Rotterdam, Topsoe, Thyssenkrupp, and others, called for incentives and clear regulation to enable global trade in the energy-rich element.
These progress reports notwithstanding, the President’s roundtable made its most important statement with the announcement of two rather obscure initiatives: It featured the launch of a “Declaration of Intent on Mutual Recognition of Certification Schemes for Hydrogen and Derivatives”; it also introduced a new ISO methodology for GHG emissions assessment of hydrogen.
Thirty-nine countries have endorsed the Hydrogen Declaration of Intent to pursue mutual recognition of hydrogen certification schemes, according to COP28.
Later in the day, another roundtable focused on the basic tasks of putting the hydrogen structure together.
Part of the so-called Breakthrough Agenda that began with COP26 two years ago, it gathered representatives of World Bank, IEA, IRENA, the UN Industrial Development Organization (UNIDO), the International Partnership for Hydrogen and Fuel Cells in the Economy (IPHE), other major non-profits and some governments.
They considered needs in key areas, including standards and certification, demand creation, research and innovation, finance and investment. The bright spot, after the morning’s announcements, was standards and certifications.
“We’ve seen standards and certification really rise in the agenda, almost in a surprising way”, said Paul Durant, who is Head of Climate Innovation for the UK government. Mr. Durant chaired the roundtable meeting.
The subsequent discussion of demand creation indicated less certainty, where a huge gap between hydrogen and fossil fuel cost was considered.
“When it comes to demand creation, we are in the very beginning”, said Oleksiy Tatarenko, Senior Principal, Hydrogen Initiatives at Rocky Mountain Institute (RMI), whose large team is working specifically on demand creation.
He spoke of the need for combined policy interventions and market-based mechanisms to grow demand for hydrogen.
“We still have a massive challenge, even in the developed countries. Making an economic case, sector by sector, you have a gap in hydrogen competitiveness versus carbon fuels or other solutions.
“Today saw a big outcome for hydrogen… We are now putting into place concrete elements to ensure it will happen”, said Laurent Antoni, Executive Director, IPHE, who spoke at both roundtables.
His organization has advocated for years for the ISO methodology and helped to shepherd the declaration on certification schemes to agreement.
“We need to rely on robust regulations, which themselves have to rely on certification, the labelling of hydrogen.
“And within the certification schemes what matters, the main point, is carbon footprint”, he said.
He also stressed the importance of the new ISO method to ensure everyone uses precisely the same methodology to quantify the carbon footprint, to allow comparison across markets and borders.
It’s a key common piece needed in all countries’ regulations to facilitate a future hydrogen market. That’s a big breakthrough, he thinks.
Antoni, an electrochemist, won’t talk colours in regard to hydrogen.
“When speaking about a kind of hydrogen, what you’re really speaking about is the carbon footprint”, he said.
“And the carbon footprint of the hydrogen is regardless you of the primary energy and technology used to produce it.
“What matters for hydrogen is to use decarbonized hydrogen”, he said, adding that “It’s not a ‘silver bullet’, but without low-emission hydrogen, we won’t achieve our climate targets”.
By: Alan Mammoser
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