Turkey Day Demand Renaissance, Part Two

November 25th, 2015 |

You may be asking yourself, when was part one?  Only a year ago today, BTU Analytics published a riveting and compelling analysis on the impacts of turkey roasting to natural gas demand.  While the story did not get picked up by any major news outlets, we’re fairly certain they were interested. I’ve taken the liberty of linking the aforementioned article HERE.

This year, when looking (hard) for a bright spot in a sustained, sub $50 WTI environment, one can’t help but notice how low their fees at the gas pump are nowadays (assuming you don’t drive a Tesla).  As I told my wife just recently, I would rather pay double and have $80 WTI, but we may as well enjoy this one perk.  In thinking about this, my mind goes to the obvious question, what kind of boost to motor gasoline demand will this Thanksgiving provide given the low cost of gasoline?  Wait, that wasn’t what you were pondering the last time you filled up your car?  That’s ok, stay with me here.

We all know that gasoline demand peaks during the summer when junior is out of school and mom and dad decide to punish themselves by driving somewhere that junior may, or may not, enjoy.  As shown by the chart below, we have noted a recent uptick in gasoline demand highlighted by the 4th highest August demand in the last 10 years experienced this summer coming in at 9,467 Mb/d.

Slide1

 

 

To drill down to the month we really care about, I have isolated both November gasoline demand and added average November gasoline price in the chart below.

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Starting in late 2008, we have seen an inverse correlation in demand and price, as one would expect.  If the trend remains true, November 2015 demand could come in near 10-year highs of roughly 9,200 Mb/d.

Now for the unfortunate truth, November really has no significant impact on gasoline demand and nor should it.  No one is driving to the Grand Canyon in November based on the fact that gasoline is cheap, we’re talking about a few more people driving to granny’s house.  But, this is a trend to keep in mind come summer 2016.

I’ll leave you this year as I left you last, eat some extra turkey, enjoy your tryptophan induced naps, and dream about all those miles you can put on the family station wagon this summer while junior (hopefully) quietly enjoys a movie marathon on your iPad.

Happy Thanksgiving from BTU Analytics!

Author: Mason Ender

Mason Ender is a partner at BTU Analytics, LLC and managing director of business development overseeing client relations, marketing, and sales. Prior to joining BTU Analytics, he was the Manager of Sales for Bentek Energy, a division of Platts. Mason has worked with energy companies both domestically and internationally to implement effective fundamental energy analytic solutions. Mason also routinely presents energy market dynamics informing the market of upcoming risks and opportunities.