The U.S. is producing the most oil in 31 years, economic growth is picking up and crude prices are plunging. So why is Americans’ use of petroleum waning?
As the U.S. moves closer and closer to energy independence, greater fuel efficiency, changing demographics and an increase in renewables are altering the dynamic that in the past would have seen demand for gasoline climbing. Gross domestic product, the value of all goods and services produced in the U.S., grew at a 2.4 percent pace in the third quarter from the year-earlier period. Oil consumption fell 0.3 percent, government data show.
“Oil demand and GDP growth used to go hand in hand,” Christopher Knittel, a professor of applied economics at Massachusetts Institute of Technology’s Sloan School of Management, said by phone on Dec. 8 from Cambridge, Massachusetts. “Now, they’re in some ways almost independent of each other because of investments in fuel economy that tended to break the link.”
The shale boom has driven U.S. output to the highest on a weekly basis since 1983, with oil production up 65 percent in just five years and the country supplying 89 percent of its own energy in 2014. The U.S. will export more energy than it imports by 2025, Wood Mackenzie Ltd. said in an October research note. The Energy Information Administration forecasts a 0.7 percent increase in demand next year; analysts surveyed by Bloomberg expect the economy to expand four times faster.
Gasoline futures added 0.9 percent to $1.6561 a gallon in electronic trading on the New York Mercantile Exchange at 11:42 a.m. London time. Brent, the global oil benchmark, rose 78 cents to $65.02 a barrel on the London-based ICE Futures Europe exchange.
Here’s an easier way to see how Americans are relying less on oil: 1,178 barrels were consumed a day for every $1 billion of GDP in September, down 33 percent from 1,760 barrels a day 20 years ago.
Some of those numbers are explained by the improving fuel economy in cars on U.S. roads. On average, automobiles sold in August could travel 25.8 miles on a gallon of fuel, up 28 percent since 2007, according to the University of Michigan’s Transportation Research Institute.
The production of biofuels is also playing a role by reducing the amount of petroleum in gasoline. Ethanol now accounts for about a 10th of U.S. motor fuel sales. Gasoline consumption has dropped 3.7 percent since 2010 even as the number of miles traveled on U.S. highways rose 0.8 percent.