Gasoline Demand, Chinese Carbon Emissions -- May 28, 2024

Locator: 47973WTI.

When I get caught up, I'm going to touch on two subjects: EVs and China's carbon emissions.

Gasoline demand: overall gasoline demand is well below historical norms. What's going on? Some of my readers tell me it's due to EV penetration. LOL. Decreased gasoline demand in the US has almost nothing to do with EV penetration. So what's the real reason. CAFE standards that have been in place for decades are starting to make a difference. How old is the average car in the US? 

Yeah, that old.  

Why does it matter?

With or without CAFE standards, the data:

1970 - 2000, from 12 to 17 mpg (I don't know how they got the 29% number):

2024, to 28 mpg, from 20 to 28, 1.4 x 20 = 28. Does that mean a 40% increase? 8/20 = 40 percent.

Hybrids: marginal effect at best.

Going forward:

China carbon emissions: Bloomberg is now suggesting that China has "won the carbon war." I'll talk about this later.

30-Second Elevator Speech -- March 28, 2018 -- Nothing About The Bakken

Driverless / autonomous driving: dead.

China / North Korea / US: huge turn of events. Xi-Trump-Kim triangulation. US seldom comes out in a "winning" position when two foes complete the threesome.

Mideast: off everyone's radar scope. Quiet won't last.

ObamaCare: back in the news. Most thought it was dead. Not.

Facebook: huge losses anticipated even if losses limited to a) no more selling data; b) lawsuits. If only revenue is from on-screen advertising, market value of Facebook plummets. When was the last time you clicked on an ad at your Facebook account?

California: civil war with itself over sanctuary cities. Link.

US auto industry: rolling back 2022 - 2025 CAFE standards could be worse for the auto industry than keeping them. With CAFE standards rolled back, US auto industry in a no-win situation: California vs US.

US auto industry, sticker shock: surveys suggest Americans unable to afford new models.

Tesla: I thought Tesla would survive 2018 just fine. But no more: a) Norway syndrome; b) Moody's downgrade; c) fiery crashes; d) poor craftsmanship; e) Jaguar - I-PACE - 20,000 auto fleet announced.

Market: everyone spooked.

Fake news: will only get worse. Print media: what you read, defines you.

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Shaden

See this post.

You can track the supertanker Shaden at this site.

Projected route of the Schaden:

Why I Love To Blog -- Reason #34 -- March 26, 2018

I'm sure, by now, everyone has seen this story from BloombergPolitics (note: politics, not business):

The U.S. Environmental Protection Agency has concluded that a landmark Obama-era effort to cut vehicle greenhouse-gas emissions is too aggressive and agrees with automakers that the standards should be revised, according to people familiar with the matter.

The agency has completed a draft decision outlining the rationale for easing fuel efficiency regulations for model-year 2022-2025 cars and light trucks, two people said. Bill Wehrum, chief of the agency’s Office of Air and Radiation, plans to meet with environmental regulators in California next week to discuss the draft determination ahead of an April 1 deadline to make it public, according to the people.

California? The 800-pound tailpipe gorilla:

The California Air Resources Board is troubled by reports of the EPA’s decision.

“California paved the way for a single national program and is fully committed to maintaining it,” [a California regulator] said. “This rumored finding -- if official -- places that program in jeopardy. We feel strongly that weakening the program will waste fuel, increase emissions, and cost consumers more money.”

Back on July 19, 2016, almost two years ago, I posted this one-line: The new standards (2022 - 2025) will be hammered out starting in 2018.

And here it is, 2018, and the new standards are being hammered out.

Back to the linked story above.

My "not-ready-for-prime-time" reply to Don who sent me the link (this is one of my really, really poor replies, but it is what it is. I will let the editors clean up the reply later.):

This will be epic.

If California refuses to play along, auto makers will have to make a decision. Either:

a) two markets - the California market and the rest of the US; or,

b) ignore the California market

US auto makers won't have the guts to ignore the California market but it would be great to call California's bluff. My hunch is that if automakers refused to meet California's stricter requirements and didn't sell new vehicles there that didn't meet standards, Californians would go nuts; demand their state government relax the standards.

I don't know. But this is going to be an epic battle: the EPA against California.

California also has time on its side. California knows that Trump is "one and done." In 2020, a Democratic president, and a new EPA. California can easily drag this out for a couple of years.

I really have trouble seeing California blink on on this one.

Meanwhile, auto manufacturers are in a tough position. Do they strategize to take advantage of "new" rules, or do they strategize to prepare for California?

My hunch: California could compromise by delaying new rules for one or two years, but at the end of the day, I think California holds the better hand -- simply because the state is so far left.

It's going to be interesting to watch.

For other posts on CAFE standards, there is tag at the bottom of the blog: CAFE_standards.

By the way, Trump needs to change the name of the name of the EPA to the "PEA, the Political Environmental Agency."

The Little Old Lady From Pasadena, Jan and Dean

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Notes to the Granddaughters

I consider myself incredibly fortunate to have been able to spend four of the best years of my life in southern California: living in a spacious apartment -- more a "house" than an apartment -- in South Pasadena, just a few blocks from Colorado Boulevard.

Wow, the stories I could tell, including the evening I spent with two young men who catered parties for Hugh Hefner -- yes, that Hefner. I was given the opportunity to be part of the catering party but the "conditions" were more than I could accept. A missed opportunity? I will never know but my hunch is my life would have turned out a whole lot differently.

I had driven pretty much non-stop from North Dakota to Los Angeles (Highland Park) in a brand new muscle car, a Chevy Nova, a gift from my dad. My last stop before driving into Los Angeles was somewhere in the high desert where I slept in the car overnight. Stepping out of the car the next morning, I noticed a rattlesnake under the car. In hindsight, an omen.

I drove into Highland Park, to the apartment my future roommate had found. While filling up with gasoline, a man about my age, perhaps in his early 20's, saw my North Dakota license plate, introduced himself saying he was from Fargo (ND), and invited me over to his house that evening.

It was an incredible evening learning about southern California. I was fortunate that it was only an evening of talking. Visions of Jeffrey Dahmer come to mind.

Update On CAFE Standards -- Forbes -- July 25, 2016

This is kind of cool. On July 19, 2016, I noted that meeting the US CAFE standard of 55 mpg by 2025 was "impossible." Today, from Forbes: a hard truth revealed from fuel efficiency upset: government can't predict consumer preferences.

The biggest news in energy policy circles this week was the release by federal regulators of a mid-term report on U.S. fuel-economy standards. The report delivered a bit of bad news: Instead of achieving the original, headline-grabbing efficiency target of 54.5 miles per gallon (mpg), the fleet of new vehicles sold in 2025 is likely to clock-in at more like 50 mpg. And even that target depends on fuel prices over the next decade—with oil prices needing to approach $100 per barrel by 2025 to keep efficiency above 50 mpg.

The shortfall came as a shock to many analysts and observers who had long operated under the assumption that U.S. vehicle efficiency targets were effectively written in stone. But those watching recent trends closely were not surprised. In fact, I explained why vehicles might not meet their targets in an earlier post, citing a nearly 30% gap between the levels of efficiency achieved and the target in 2016.

Rightly so, administration officials underscored this week that the projected 54.5 mpg was just that, a projection. As one official said, “54.5 isn’t a standard, never was a standard, and isn’t a standard now. 54.5 is what we predicted, in 2012, the fleet-wide average could get to, based on assumptions that were live back then about the mix of the fleet.”

This underscores an important reason why the target won’t be met, and why achieving future emissions reductions in transportation could be exceedingly difficult: The standards are tied to consumer preferences. As preferences deviate from the forecasts, the target falls short. That’s what has happened over the last few years as consumers went out and bought more pick-ups and SUVs than predicted.

Much, much more at the link. 

Having said that, it will be hard to complain about 50 mpg if gasoline continues to cost less than $2.00/gallon.

Also from the linked article:

Instead of representing 43% of the U.S. market, SUVs and pick-up trucks have accounted for nearly 60% of auto sales this model year. Meanwhile, sales of hybrid electric vehicles in the first half of this year hit their lowest levels in five years, implying that in addition to a shift toward trucks, consumers may be purchasing less efficient vehicles within each given class.

The Tesla Sweet Spot -- July 19, 2016

Comments later.

This graphic should be viewed in conjunction with this post: soccer moms, SUVs, and CAFE standards.

The new standards (2022 - 2025) will be hammered out starting in 2018.

Soccer Moms, Car-Based SUVs, Truck-Based SUVs, And CAFE Standards -- July 19, 2016

John Kemp posted this graphic today.

Idle comments regarding the graphic above:

• minivans are falling out of favor; gradually disappearing; folks who like minivans are probably transitioning to car-based SUVS
• car-based SUVs are increasing in sales whereas minivans are decreasing; the number of truck-based SUVs seems to have plateaued over the past five or six years
• pickups -- interestingly enough -- have actually been decreasing in sales in the past five years compared to the late 1990s / early 2000s
• if the US "manufacturing economy," housing, general economy picks up, we might see an increase in the sales of pickups, but it certainly looks like the soccer moms are calling the shots -- having moved to car-based SUVs over the past ten years

CAFE Standards:
 
Now, some thoughts on car-based SUVs, truck-based SUVs, and CAFE standards and how the federal government influences manufacturing patterns (and buying patterns).

Note that "car-based SUVs" and "truck-based SUVs" are differentiated. Hold that thought.

Back on February 21, 2015, I posted:

Pick-Up Trucks

I don't know if folks have noticed -- it's hard not to notice: pick-ups are getting bigger and bigger. In Texas they are really getting big. I never understood it; with the CAFE standards I thought automobile and light truck manufacturers would have been forced out of the "big pick-up" business. It turns out that, in fact, things changed. The change must have been seen by no one except the light truck manufacturers. BloombergBusinessweek has a huge story on why pickup trucks are getting bigger and bigger. The fact that BBW did a story on this suggests to me that a lot of folks were caught unaware. The link to the story is here. 

Many, many story lines. It has to do with CAFE standards which some doctorate student figured out in 2011:

Kate Whitefoot, a researcher at the National Academy of Engineering, came to believe that the new CAFE rules were tilted in favor of large pickup trucks while working on her doctorate in design science at the University of Michigan. In a 2011 article in the journal Energy Policy, Whitefoot and a mechanical engineering professor, Steven Skerlos, concluded on the basis of computer simulations that it would be cheaper to meet the new standards for big pickups than for small pickups, SUVs, or cars. “The goal of the policy was that vehicle size wouldn’t change at all,” Whitefoot says. Instead, “We’re seeing that it clearly is going up for trucks.”

Light truck manufacturers are reaping huge benefits from the new CAFE standards and their goal is to put every American in a pickup truck (although that's a bridge too far in Boston).

If you're read this far, then consider this, some dots to connect. Regular readers know that there will be a relative shortage of oil in 2017, possibly as early as 2016, as the majors shut down / delay / cancel "big cap" projects in 2014/2015 due to the slump in the price of oil.

Now, add that to the fact that auto and light truck manufacturers are out to put every American in a big pick-up truck. Those big pick-up trucks are gas guzzlers.

So, a perfect storm for some folks in 2017, maybe in 2016, certainly by 2018.

But it gets even better for oil and gas investors (see disclaimer): the CAFE standards that favor big pickup trucks (and possible bigger SUVs) do not change until 2022.

The NHTSA says it will look at the rise of big pickup trucks as part of a review of the CAFE rules that will apply to model years 2022 to 2025. That review doesn’t have to be finished until 2018, but the skirmishing has already begun.

But regardless of the new rules, they don't come into effect until model years 2022. That's seven years from now. Seven more years during which light truck manufacturers will try to get every American into a pickup truck. With an Apple dashboard.

For those who survive the current slump in the oil and gas industry, 2017 - 2022 should be awesome. That's still within my investing lifetime.

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The post on January 26, 2016, also dealt with the "perfect storm."

An additional thought. My hunch is that a new SUV purchased today will be on the road for ten (10) years. Think about that when looking at the John Kemp graphic above.

Business As Usual -- Solar Raises More Financing Through "Tax Equity Financing" -- July 18, 2016

Locator: 10165SRE.

Active rigs:

	7/18/2016	07/18/2015	07/18/2014	07/18/2013	07/18/2012
Active Rigs	30	73	196	189	208

RBN Energy: Caribbean crude storage market.  Think:

• Venezuela storage: requirement for light oil
• China: shore up future crude oil requirements
• US hedge funds: easy profits

From the article:

With crude storage tanks along the U.S Gulf Coast nearly full, the nine storage terminals currently operational in the Caribbean offer an advantageous close-by alternative. Right now these terminals are heavily used by Venezuela for oil blending and distribution, but there has been growing interest and investment from outside the region. China is now neck and neck with the U.S. as the world’s largest crude importer and is making a significant strategic investment in Caribbean storage to cement crude supply deals with Latin American producers.

Private equity fund ArcLight Capital and trader Freepoint Commodities together purchased a huge terminal and shuttered refinery in the U.S. Virgin Islands in January of this year (2016) and have leased most of the working storage to Chinese-owned Sinopec. Today, we examine the growing role of Caribbean crude terminals. (This blog is based on Morningstar’s recently published Caribbean Crude Storage Outlook, which provides a comprehensive analysis of this evolving market.)

Crude oil prices have dropped by about 50% since June 2014 to around $45/barrel in the face of a global supply surplus. Falling prices led to a contango market structure, which encourages crude storage because prices for future delivery are higher than today’s price.

As a result of the contango market and other supply/demand dynamics, crude inventory levels in the U.S. and overseas have risen to record levels in the past six months.

Although total U.S. commercial oil inventories have retreated by about 3% from their late April 2016 record high of 544 million barrels, they are still 33% above their five-year average for this time of year.

Crude inventory levels in the Gulf Coast region also reached record levels (286 MMbbl) this April and are still 39% above the five-year average. To accommodate increased demand for storage capacity, the Energy Information Administration reports that Gulf Coast storage capacity increased by 13 million bbls between September 2015 and May 2016.

More new-build storage capacity is on the way – including an 11-MMbbl salt-dome underground storage facility in Houston being developed by Fairway Energy Partners.

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$50 Oil For The Rest of 2016

That's what the industry is reporting. I think we will be closer to $45 than $50 through the rest of the year. This is a challenging environment for the US oil and gas industry but this is absolutely horrendous for Saudi Arabia. Outrageously, early on, there were some reports that Saudi was looking forward to $80 oil by the end of the year, but it quickly became clear that the kingdom would be lucky to see $60 oil by the end of the year, and re-set their spending plans accordingly. Fifty dollars is half of what they need ($100) and if the price of oil trades nearer $45 than $50 the rest of the year, things do not bode well for the Mideast.

Today, despite a failed coup attempt in Turkey over the weekend, oil is actually falling in price -- probably due to a) strength of the dollar following the failed coup; and, b) continued glut.

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Canada's Oil Heartland: Worst Recession on Record

From Bloomberg/Rigzone:

Alberta, the home of Canada's oil sands, is going through its worst downturn in activity on record as a prolonged period of low oil prices and the wildfires earlier this year buffet the provincial economy.

According to Toronto-Dominion Bank's economics team, the cumulative annual percentage contraction in real output projected for 2015 to 2016 exceeds even the financial crisis, as well as the last supply-side driven crash in oil prices in the mid-1980s, in magnitude.

While the recent episode seems poised to be the worst single recession on record, the two recessions in the 1980s mean that stretch "is still likely to be regarded as the most challeng­ing period in the post-war period in Alberta," says a TD team led by Deputy Chief Economist Derek Burelton.

However, TD's team notes that labor market indicators point to a more mild downturn.

"Periods of boom followed by bust are no strangers to an econ­omy that is tied to the vagaries of the global oil market," write the economists. "The current recession is expected to yield a cumulative annual decline in real GDP of around 6.5 percent, which is more than twice that of the average of past downturns."

While economic activity appeared to be picking up earlier this year, the wildfires that wreaked havoc in the region and disrupted oil operations threw a wrench in the province's nascent comeback story. The economists note that the softness in the Canadian dollar and low interest rates helped Alberta's economy escape an even worse fate.

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Sempra Gains OK To Increase LNG Exports Non-Free Trade Agreement Countries

The State of California may be "turning on "Sempra" by a) denying a short connector pipeline request; and, b) denying a modest rate increase, but Sempra presses on. From Seeking Alpha:

• Sempra Energy says the Cameron liquefied natural gas project in Louisiana has won approval from the U.S. Department of Energy to increase its export capacity to non-free trade agreement countries.
• The authorization to export an additional 1.41B cf/day of natural gas will bring Cameron LNG's export capacity to 3.53B cf/day, or 24.92M tons/year.
• SRE says construction on the first phase of the $10B Cameron LNG project is underway; the facility is expected to commence operations during 2018, with the first full year of operations in 2019.
• The Cameron LNG venture is owned by SRE, Engie, Mitsui and a Japanese joint venture, and comprises the Cameron LNG liquefied natural gas receipt terminal in Hackberry, LA, and the construction and operation of the liquefaction export facilities.

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Stayin' Alive

By raising more cash through "tax equity investing" (something the rich folks do), SolarCity Corp is stayin' alive. From Reuters:

SolarCity Corp (SCTY.O), which received a takeover bid from Elon Musk's Tesla Motors in June, said it has raised $345 million in tax equity and also increased its debt facility by $110 million to $760 million.

At US PREF we get a talking paper on "tax equity investing." It begins:

Federal clean energy policies have made tax equity a critical component in the private - sector financing of clean energy projects.

This is because federal tax credits and other tax benefits are among the government’s main incentives to help drive the adoption of domestic clean energy technologies.

Examples of such tax benefits include the 30% investment tax credit (available for solar through 2016 and for wind through 2012); the 2.2 cent production tax credit (available through 2012 for wind projects that do not elect the ITC); and accelerated depreciation (including bonus depreciation) that can be used to offset taxable income from other sources.

The paper does not appear to be updated to reflect any (?) extensions of the tax credits.

An increase in "tax credit investing" in 2016 was predicted:

The U.S. wind and solar markets in 2015 saw $11.5 billion in new tax equity deals, up from $10.1 billion in 2014, John Eber, managing director, head of energy investments for J.P.Morgan, said on January 13, 2016.

“2014 was a huge year, so any increase in 2015 over 2014 is significant,” according to one analyst. “Those are sizeable numbers for the tax equity marketplace from a historical perspective.”

Of the $11.5 billion, $6.4 billion was secured in the wind marketplace for 40 projects totaling 5,700 MW of capacity. The total for the wind marketplace was the same as in 2014. Three leading sponsors in the wind tax equity marketplace completed deals totaling about $1 billion each, accounting for 47 percent of tax equity raised in the year.

In the residential solar tax equity marketplace, about $2.6 billion was raised by three leading residential solar companies, accounting for 90 percent of the residential market. That total was up from $1.9 billion in 2014.

The tax equity market will be active in 2016.

“Looking at extensions, the full value of the [wind production tax credit] will be available for start of construction through 2016, so clients and investors will take advantage of the full value time period,” he said. “[The investment tax credit] for solar will be longer, so the solar market will be business as usual.”

Business as usual. 'Nuf said.

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Stayin' Alive Part II

 Updates

Later, 8:48 p.m. Central Time: one wonders if the federal government had mandated its own government fleets and especially the quasi-governmental agency, the US Postal Service, fleets to be 100% electric, how much better this would have been for the environment than putting 98% of the onus on the private sector. Every time I see one of those gas-guzzling (diesel?) blue-and-white postal trucks driving down the street, I wonder why they aren't EVs running on coal?

Original Post

USA Today reports that is unlikely that the US government will relax CAFE standards even though Americans are making personal choice to purchase larger gas-guzzling vehicles.

US auto manufacturers, if they get no relief, are likely to be forced to buy "credits" from battery manufacturers. If MuskMelon can hold on long enough, he looks forward to huge payday in 2022. 

Tuesday, February 23, 2016 -- Gasoline Demand To Set New Records? It Could Be Close; It May Depend On How Many Teslas Are Delivered

From EIA:

“Based on estimates in the most recent Short-Term Energy Outlook, vehicle travel in the United States in 2015 was almost 4% above its 2007 level, but motor gasoline consumption has not exceeded its previous peak in 2007.

Improvements in light-duty vehicle fuel economy are largely responsible for this outcome. STEO forecasts motor gasoline consumption to average 9.23 million barrels per day (b/d) in both 2016 and 2017, about 0.6% below its 2007 level. In contrast, vehicle travel is expected to grow to levels 5% and 7% above the 2007 level in 2016 and 2017, respectively.”---EIA

Starting in November, 2005, and through August, 2007, the amount of gasoline delivered in the US exceeded the comparable month, one year earlier. For the first eight months of 2007 US gasoline demand hit all-time records that have not been beat since (same month comparisons). But it's been close.

But look at this, September, 2015, did hit a record for the month of September (see spreadsheet below). And gasoline demand in October, 2015, was the second-highest October for gasoline demand, beating the number even in October, 2007. The "top October" was back in 2006. In fact, 2015 had some incredibly huge months for gasoline demand, not all that different from 2007.

Comparing 2007 (the record year) with data so far reported for 2015, it appears that the delta has been about 4 million bbls/month (the range is as low as a million bbls or so to ten million bbls or so). Four million bbls/month = 150,000 bopd.

I find the numbers staggering. I find the data most interesting.

Again, the EIA STEO forecasts motor gasoline consumption to average 9.23 million barrels per day (b/d) in both 2016 and 2017, about 0.6% below its 2007 level. In contrast, vehicle travel is expected to grow to levels 5% and 7% above the 2007 level in 2016 and 2017, respectively. (Doing the math, it looks like the average daily consumption in 2007 was 9.2857 million bopd.)

In 2015, two things to note: a) gasoline was incredibly inexpensive, but it was getting less expensive as the year went on; and, b) the US economy had slowed significantly.

Gasoline demand started off very slowly in 2016 but has now picked up. The EIA estimates the average consumption to be 0.6% below its 2007 level. If the economy picks up, and gasoline remains this inexpensive, I wouldn't be surprised to see gasoline consumption to go up.

But considering all the mileage improvements and CAFE standards and all the hybrids and all the EVs and all the Teslas on the road, it's amazing that gasoline consumption continues to increase after all these years.

Note: I may have mis-read the spreadsheet, but I spent a few minutes looking for errors I may have made. Regardless, in notes like this, typographical and factual errors are likely. If this information is important to you, go to the source.

Vehicle Fuel Economy, 2007 - 2015

A big "thank you" to a reader for sending me this link. From the University of Michigan: the average sales-weighted fuel-economy rating (window sticker) of purchased new vehicles for October 2007 through December 2015 --

The average sales-weighted fuel economy was calculated from the monthly sales of individual models of light-duty vehicles (cars, SUVs, vans, and pickup trucks) and the combined city/highway fuel-economy ratings published in the EPA Fuel Economy Guide (i.e., window sticker ratings, not actual fuel consumption) for the respective models.

Vehicles purchased from October 2007 through September 2008 were assumed to be model year 2008. Analogous assumptions were made for vehicles purchased in each following model year.

The fuel-economy information was available for 99.7% of vehicles purchased.

The period selected by the U of M to highlight is noteworthy in that the data covers exactly the period in which the Bakken boom began in North Dakota (2007) and continues to the end of 2015, a full year in which gasoline prices plummeted.

First the graph and then the table.

Related posts:

New CAFE standards are a few years off:

Regular readers know that there will be a relative shortage of oil in 2017, possibly as early as 2016, as the majors shut down / delay / cancel "big cap" projects in 2014/2015 due to the slump in the price of oil.

Now, add that to the fact that auto and light truck manufacturers are out to put every American in a big pick-up truck. Those big pick-up trucks are gas guzzlers.

So, a perfect storm for some folks in 2017, maybe in 2016, certainly by 2018.

But it gets even better for oil and gas investors (see disclaimer): the CAFE standards that favor big pickup trucks (and possible bigger SUVs) do not change until 2022.

The NHTSA says it will look at the rise of big pickup trucks as part of a review of the CAFE rules that will apply to model years 2022 to 2025. That review doesn’t have to be finished until 2018, but the skirmishing has already begun.

But regardless of the new rules, they don't come into effect until model years 2022. That's seven years from now. Seven more years during which light truck manufacturers will try to get every American into a pickup truck. With an Apple dashboard.

From August 26, 2015:

To add a bit of fuel to this fire, remember that auto manufacturers are setting new records with sales of gas guzzling SUVs, cross-overs, and pick-ups. EV sales are essentially flat. New, potentially stricter CAFE standards are not up for review until 2018, and won't take effect until 2020, IIRC.

From February 22, 2015:

The average fuel economy of all new vehicles sold in the U.S. barely rose last year. The fleet average in 2014 was 24.1 miles per gallon, only one-tenth of a mile per gallon better than 2013. In 2013, the average rose half a mile per gallon. 

GM to cut production at small-car plant, June 12, 2015:

U.S. consumers continue to prefer SUVs and pickup trucks over sedans, particularly small ones, as gasoline prices remain low. The plant makes the Chevrolet Sonic and Buick Verano compact cars.

April 26, 2012:

• automobile executive focused on meeting new CAFE standards (54.4 mpg by 2025)

Just An Observation Regarding US Gasoline Demand And How The Obama Administration Sees It -- Basically Flat -- August 26, 2015

Updates

Later, 3:16 p.m. Central Time: this is why I love to blog. Not less than two minutes ago I was still correcting the typographical errors on the original post below. I leave this page to check my mail, and Don has already sent me a link validating my thoughts with regard to bigger SUVs, cross-overs, and pick-ups going forward. Business Insider is reporting that Ford may bring the Bronco back, bigger and better than ever. The article was just posted 52 minutes ago, about the time I started working on the graphic below.

A source familiar with Ford's product planning said that the company is considering the revival of the Bronco SUV. According to the source, the new Bronco will likely be a midsize affair comparable in size to Ford's popular Explorer.

However, unlike the Explorer — which is now a crossover — the Bronco will be based on a midsize pickup truck.

There's just one problem. Ford currently does not offer a midsize pickup in the US.

That's where the Ranger comes into play. Sources within Ford say that the Ranger pickup could return to the US market as early as 2018.

Although the Ranger name may be defunct in the US market, Ford has been selling a midsize truck overseas using the name for nearly 20 years.

Ford, like many others, abandoned the compact pickup truck market during the late 2000s when growth in the segment slowed and instead focused on the development of more profitable larger trucks, SUVs, and crossovers.

However, with the recent return of the GM duo and a revamped Toyota Tacoma, there is new life in the once dormant segment — albeit with slightly larger vehicles.

My hunch is automobile manufacturers are rushing to get out bigger vehicles a) before new CAFE standards are instituted; and, b) while consumers "believe" cheap oil is here to stay.

See also "Muscle Cars" are back. 

Original Post

 

It's a bit "busy," but interesting. Hope you can understand it.

Everything in blue (the x-axis and the line in atrial fibrillation) is from the EIA. Using an x-axis from 0 bopd to 12 million bopd (neither of which is close to reality between 1992 and today), it appears at first glance that US gasoline demand since 1992 has been relatively flat.

However, if one uses an x-axis from 5.5 million bopd to 10 million bopd (much closer to reality), the red line is actually quite remarkable.

It would be interesting to go back to 1992 and see what the projections for gasoline demand in the US were at that time.

The graph is even more striking when one remembers that the 1990's were known for stricter and stricter CAFE standards (mileage standards) and that over the years, the technology for more and more efficient engines has improved. In addition, Americans have demanded more fuel-efficient cars and there was an overall movement toward compact and sub-compact cars with the history of OPEC embargoes. And, of course, we can't forget all the EVs that Americans are now driving. And, of course, all the bicycle riding due to the fitness craze. And yet the gasoline demand from 1992 to today -- about 25 years -- is quite striking.

To add a bit of fuel to this fire, remember that auto manufacturers are setting new records with sales of gas guzzling SUVs, cross-overs, and pick-ups. EV sales are essentially flat. New, potentially stricter CAFE standards are not up for review until 2018, and won't take effect until 2020, IIRC.

It appears gasoline demand records were set:

• August, 2007, third week: 9.762 million bopd
• July, 2005, first week: 9.721 million bopd
• August, 2003, fourth week: 9.668 million bopd

We are currently about 9.6 million bopd per John Kemp's most recent tweet on the subject.

Source here.  Technically, I guess this is "gasoline supplied," not necessarily "consumed" or demanded." But I assume all three terms, when it comes to gasoline, are nearly synonymous.

Note: I often make simple errors. For example, I probably should have raised the left end of the red line slightly more. In addition, the red line would have some steeper slopes in places, and it might have even been a bit flatter in places. There could be other mistakes in the graph above. If this information is important to you, go to the source.

Why I Love To Blog, Reason #45,398 -- July 23, 2015

Readers and I noticed this quite some time ago, that diesel was cheaper than gasoline, something not seen in quite some time. I first noted that phenomenon on my cross-country trips in states like California. Since it was an anomaly in California, I assumed it had to do with the relative degree of economic activity. At the time diesel was first less expensive than gasoline occurred sooner in California than other states I was driving through, (Texas to California; and, Texas to North Dakota), but now it appears to be a nationwide phenomenon:

Today's EIA "energy cookie:"

On July 13, the U.S. average diesel fuel retail price fell below the average regular gasoline retail price for the first time since the week of August 10, 2009.

From August 2009 through June of this year, retail diesel fuel sold at an average premium of 34 cents per gallon over regular grade gasoline, with the difference reaching more than 90 cents/gal in January.

Tight diesel markets over the past six years have reflected growing diesel demand from developing economies and the switchover to ultra-low sulfur diesel (ULSD) for home heating oil in northeastern states, where more than 80% of U.S. use of oil for space heating occurs. Over the same period, gasoline demand has generally been weak, reflecting increasing vehicle fuel economy and changing consumer driving patterns. --- EIA

I'm having a bit of trouble understanding EIA's rationale for the switch: growing diesel demand (and now the price of diesel is lower than gasoline) and gasoline demand has generally been weak (and that's why gasoline is priced higher?). Doesn't make sense. I must be mis-reading the explanation which is not unusual for me.

However, that comment about "gasoline demand has generally been weak," must be in the eye of the beholder. Judge for yourself, the data is at this source:

Maybe I'm biased (yes, I know I'm biased) but the flat line from 2009 to 2015 is still higher than every year except for a three- or four-year period in the early 2000's. I have trouble calling gasoline demand "weak" in the US. [Especially in light of the increasingly higher CAFE standards; the increased interest in electric vehicles; the increased ridership on bullet trains --okay, I'm joking about bullet trains.]

When I read statements like that ("gasoline demand is weak") coming from the EIA, I am reminded of what someone told me the other day:

"Bruce, remember the EIA is an agency of the US Department of Energy. It should be above politics, but remember, it reports to a cabinet official who sits at the table when policy decisions affecting energy are being made. And "strong gasoline demand" does not fit the administration's story."

That was paraphrased.

There is some conspiracy thinking out there that the administration manipulated oil prices down to $50 to force Iran to come to the bargaining table. I find that ludicrous, but there are some smart people who actually believe that. Of course, at the other end of the spectrum, when we get back to $150 oil, someone will blame it on speculators.

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Something To Hide

There's only one way to interpret this story:  HHS Rejects Planned Parenthood FOIA Request Because It’s ‘Not Newsworthy’.

Current and past directors of HHS and their staff have been complicit in illegal practices involved in the selling of baby parts by Planned Parenthood. One begins to wonder if over the years there was some big money from pharmaceutical companies supporting Planned Parenthood operations.

Does anyone remember The Immortal Life of Henrietta Lacks? It would be interesting if Rebecca Skloot would be willing to write the Planned Parenthood and cancer research story? 

Tea Leaves -- July 4, 2015

The tea leaves continue to swirl. I still bet that US gasoline usage will hit an all-time record this August. If it does, it will be interesting if the mainstream media covers the record. It goes against all conventional "wisdom."

Everyone I talk to is quite surprised to hear that we are nearing an all-time gasoline demand record -- despite all the EVs on the road, and Elon Musk delivering a record number of Teslas this past quarter.

And despite the CAFE standards that have been put in place since Abraham Lincoln ran on the "green energy" ticket. And despite all the subcompacts being bought by millions of Americans on both coasts. And despite all the folks taking advantage of the best public transportation system in the world, the Los Angeles Metro.

But I digress.

What made me think (again) about the gasoline demand record possibly being broken this year was this story in the business section of today's Los Angeles Times:

The confrontation between competing tour bus operators on Hollywood Boulevard escalated quickly.

Jeff Napshin, owner of Star Track Tours, was distributing fliers on a busy corner a few months ago when an angry rival approached, ridiculing Napshin. Cellphone video shows Patrick Hickey, owner of Rockin' Hollywood Tours, getting more and more irate.

"Get that phone out of my face," Hickey shouted as he pushed the phone away, sending it crashing to the ground. On the video, Napshin can be heard complaining, "He just hit me. You witnessed it."

The tour bus business on Hollywood Boulevard has become ultra competitive — at times downright hostile. Operators are looking to score big profits from a recent surge in visitors to Los Angeles.

If the surge has already begun, it will only accelerate in August.  I know I'm doing my part, putting a lot of miles on my 2005 Chrysler minivan.

More data points from the article:

The rivalries among tour bus companies have become more heated as tourist numbers have climbed.

Los Angeles set a tourism record last year, with 44.2 million visitors, a 4.8% increase over the 2013 tally.

By the way, most of these tourists stay in motels and hotels and don't give a hoot about water restrictions and the California drought. Just saying.

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Los Angeles Destination: Billionaires' Beach

High on my list this summer is to visit Carbon Beach in Malibu. I really doubt I will do it; it's such a pain to drive that far north along the ocean this time of year, but I would be doing my part to keep public access to California beaches a reality.

The Los Angeles Times is reporting:

In the decades-long struggle to make the beaches fronting California's well-heeled coastal communities more accessible to the public that owns them, a mile-long stretch of Malibu known as Billionaires' Beach has been the site of a particularly pitched battle.

And on Tuesday, the commission will officially announce the opening of another path about a half-mile from the Geffen property.

Activists call it an important victory in the fight between homeowners seeking privacy and people eager to expand their right to walk, run, lie and play on the sand, which is public property up to the average high-tide line.

The debate over the new Carbon Beach trail dates back more than a decade. Access proponents have long wondered why property owner Lisette Ackerberg, who supported many conservation causes, fought so hard to keep people off the public beach in front of the home she and her husband, the late Norman Ackerberg, built on the coveted stretch of coast.

If I go I will have to go alone. I would have to park several miles from the access point and take a bus or walk. The family unit traveling with me is unlikely to want to walk that far. I could park at one of my favorite "museums," The Getty Villa, and then walk the 5.8 miles to Billionaires' Beach. Three miles/hour -- two hours. Each way. Or better yet, bike it. I have a bike carrier and a bike out here; park the car at the Getty and bike to the beach. Hmmmm.....a great photo op.

GM To Cut Production At Small-Car Plant -- June 12, 2015

This is so cool. For background, read this post, dated February 22, 2015. The 30-second bite: CAFE standards favor SUVs and trucks, of all sizes. Result? Today's story out of GM being reported by Reuters: GM to lay off workers, cut production at Michigan small-car plant.

General Motors Co will lay off 100 workers and cut production at its Orion Assembly small-car plant in suburban Detroit because of slow sales, the company said on Friday.

This is in addition to the 160 layoffs GM announced last November at Orion Assembly.

U.S. consumers continue to prefer SUVs and pickup trucks over sedans, particularly small ones, as gasoline prices remain low. The plant makes the Chevrolet Sonic and Buick Verano compact cars.

The plant has about 1,580 hourly workers and 180 salaried positions. GM said the 260 workers to be laid off will be let go by the end of this year.

This is embarrassing. I had never heard of the Orion. Or the Sonic. Or the Verano. Seriously. Never heard of them. For me, the Orion is a constellation; Sonic is a fast food chain with really good milk shakes; and, "verano" is an Italian word for "we don't serve Americans here." Or maybe Greek for "it's all over now."

Friday, Part I -- June 12, 2015

A long-time reader, and frequent contributor of links for the blog, mentioned

.... that he went to the Menards store in Dickinson.. it is huge ... compared to other Menards stores.

I asked the man loading some paver brick for us about the new store. He indicated this was the largest menards store of all, but that the one to open in Williston was to be a bit larger.

RBN Energy: moving crude oil products.

The U.S. produces and consumes more refined petroleum products than any other nation on Earth. According to the U.S. Energy Information Administration (EIA), production of finished motor gasoline (which includes ethanol) is averaging more than 9.5 MMb/d, while distillates production is flirting with 5 MMb/d and production of kerosene-type jet fuel (the most widely used; also known as kero-jet or jet-kero) has been holding steady at about 1.6 MMb/d.
Residual fuel oil, a heavier fuel often referred to as Number 5 or 6 and used for power generation, among other things, has gradually been falling out of favor and is being produced in smaller and smaller quantities.
U.S. consumption of gasoline, meanwhile, has been on a generally downward slope the last few years as fuel-efficiency gains outpace the gradual rise in the numbers of vehicles on the road and miles driven. Last year, gasoline consumption (again including ethanol) averaged just over 8.9 MMb/d, and it’s expected to inch down through the early 2020s as the federal government’s Corporate Average Fuel Economy (CAFE) standards ratchet up, although that trend may be slowed by lower prices since last year that have boosted domestic gasoline consumption through June 2015. 

Consumption of distillates topped 4 MMb/d in 2014, and is seen rising modestly the next few years as diesel use in cars (already common in Europe) catches on among Americans. Kero-jet consumption approached 1.5 MMb/d last year; its use also is expected to rise at a modest pace. And demand for residual fuel oil continues to peter out. We should also point out that U.S. refiners have increasingly been producing refined products for the export market as well as for domestic consumption.

It will come as no surprise to frequent readers of RBN Energy’s blogs that U.S. refineries are less and less dependent on imported oil, and instead are getting more and more of their crude from the Bakken, the Eagle Ford and other domestic sources. 

It’s also true that imports of refined products are down; as recently as 2005, 600 Mbd/d of gasoline was being piped or tankered in from abroad, but by 2014 the pace of gasoline imports had slowed to 49 Mb/d. Distillate imports are down too (from 365 Mb/d in 2006 to 194 Mb/d last year), as are imports of kero-jet (217 Mb/d in 2007; 94 Mb/d in 2014).
That means that U.S. refineries are producing the vast majority of the petroleum products our cars, trucks, trains, airplanes and oil furnaces burn. 

The fuels produced at U.S. refineries at a pace averaging more than 16 MMb/d need to be moved as efficiently as possible from refineries to where they are stored and (ultimately) consumed. More often than not, gasoline, distillate and jet fuel are moved much--or, in a few cases, all--of the way to market via pipeline. There are more than 63,000 miles of petroleum products pipelines in the U.S., which as you’d expect fan out from refineries (dark blue triangles) to storage terminals in areas with significant fuel demand.

There the stored fuels are generally distributed by tanker trucks to heating oil dealers and gas stations; many airports get their kero-jet delivered by smaller-diameter pipeline. (Later in this series we’ll look at the major petroleum products pipelines.)

Crude oil pipelines, meanwhile, are clustered in the major production areas and typically flow from production regions or import terminals to refineries.

Active rigs:

	6/12/2015	06/12/2014	06/12/2013	06/12/2012	06/12/2011
Active Rigs	76	185	187	211	169

Update On Canadian Oil Sands -- February 25, 2015; BP Begins Exporting Ultralight Crude Oil From Houston

Before we get to the Canadian oil sands story, this short blurb from Houston Business Journal:

London-based BP has begun exporting ultralight crude oil, called condensate, from the Houston Ship Channel.

While exporting crude oil remains illegal, the federal government has begun to allow more leeway for exporting lightly processed condensate produced from Texas' Eagle Ford Shale, even though exact clarity on what is allowed is somewhat lacking.

Reuters is reporting:

Oil sands cash flows will fall by $23 billion in the next two years, energy consultancy Wood Mackenzie said in a report on Tuesday, as low global petroleum prices make it less economical to extract bitumen from northern Alberta.

Canada's oil sands hold the world's third-largest proven crude reserves after Saudi Arabia and Venezuela, but operating costs are among the highest globally, according to Wood Mackenzie principal analyst Callan McMahon.

Current operating costs reach $37 per barrel for thermal projects, in which steam is pumped underground to liquefy tarry bitumen so it can flow, and $40 per barrel for mining projects.

With benchmark U.S. crude trading around $50 a barrel, down from more than $100 in June, McMahon said the oil sands region's cash flows would drop by $23 billion in 2015 and 2016 combined.

Producers including Suncor Energy Inc, Cenovus Energy Inc and MEG Energy have slashed 2015 capital expenditures in response to the oil price slump.

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CAFE Standards? What CAFE Standards

Bloomberg Business is reporting:

Something strange happened two years ago at Switzerland's annual caucus of ultra-luxury car makers. Rolls-Royce, a brand dedicated to the driven, not the driver, unveiled a vehicle that had just two doors, an engine the size of a small Jacuzzi, and a transmission that pinged satellites in order to adjust to the road ahead. The Wraith, as it was called, had no space for a jar of Grey Poupon.

“We’re evolving,” says Eric Shepherd, president of Rolls-Royce North America, about the shift into a sportier model. “Take a 22-year-old guy who just sold his app company for $22 million. When he gets behind the wheel of a Wraith, he’s hooked.”

Things have grown ever more strange for the one percent on four wheels. The fancy cars seem to be multiplying and taking unexpected shapes. Bentley moved to build an sport utility vehicle in 2013, a decision matched by Rolls last week. 

Ferrari has brought out a 963-horsepower supercar with an electric motor, which has since been joined by an $840,000 Porsche with two electric motors. Orders and eager deposits started have been pouring in.

By the way, this makes the Tesla problems all the more interesting: there are no shortage of multimillionaires and billionaires ready and willing to buy expensive cars -- but apparently not Teslas. One almost gets the feeling that Tesla couldn't be at a worse price point: too expensive for most of us, but not expensive enough for the top one percent.

Once the weather improves and I start biking again, I'm going to look for some Ferrari / Porsche re-charging stations here in DFW metroplex. LOL.

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Statue of Liberty Probably Won't Go Underwater This Year -- Or Ever, Despite National Geographic Cover

Forbes is reporting:

Yet another bitterly cold, snowy winter is destroying alarmist global warming claims, proving once again that over-the-top global warming predictions are proving no more scientifically credible than snake oil.

This morning, stunning photos show New England lobster boats frozen in port, looking like they are stranded deep within the Arctic Circle. The boats have been frozen in place for weeks, which would be remarkable enough if this were the middle of January. However, the calendar is about to turn to March.

Connecticut is experiencing its coldest February in recorded history. So is Michigan. So is Toronto. Cleveland and Chicago are experiencing their second coldest February in recorded history. Frigid and record cold temperatures are being set from Key West to International Falls. At the same time, blizzard after blizzard is burying much of the nation with record winter snow totals, with winter snowfall records beings set from Boston to Denver.

The Kennedy children and grandchildren are seeing more snow than ever this year:

Many global warming activists are still attempting to defend the discredited IPCC prediction, claiming a single winter does not invalidate a long-term trend. The problem with such an assertion is that last winter was exceptionally cold and snowy, too. And winters nationwide have been getting colder for the past 20 years.

Objective scientific data show winters have been getting colder and colder throughout the United States for the past two decades. When global warming alarmists claim winters will become warmer and free of snow, yet their predictions are proven false for 20 years in a row, at some point logical people come to realize that global warming alarmists are selling snake oil.

Another global warming activist tactic is to argue that global warming actually causes more snow. Of course, this is exactly the opposite of what they used to claim, as shown in the IPCC prediction. Moreover, real-world scientific data prove their new claims false.

Global warming activists argue that warmer air can hold more moisture, so winter snow storms that used to bring 12 inches of snow now bring 14 inches of snow. The problem with this new assertion is – as documented above – winter temperatures are substantially colder now than they used to be. Global warming activists cannot claim recent record snowfalls are caused by warmer winters when winters are in fact much colder than they used to be.

Update On CAFE Standards And Big Trucks, SUVs -- February 22, 2015

Big Pick-Up Trucks, SUVs In Texas

Remember this from yesterday's blog?

I don't know if folks have noticed -- it's hard not to notice: pick-ups are getting bigger and bigger. In Texas they are really getting big. I never understood it; with the CAFE standards I thought automobile and light truck manufacturers would have been forced out of the "big pick-up" business. It turns out that, in fact, things changed. The change must have been seen by no one except the light truck manufacturers.

BloombergBusinessweek has a huge story on why pickup trucks are getting bigger and bigger.

The fact that BBW did a story on this suggests to me that a lot of folks were caught unaware. The link to the story is here.  

The Sunday edition of The Dallas Morning News also carried the story with a slightly different angle:

Big Escalade SUVs fly off the lot at Sewell Cadillac, even though the leases cost $1,000 or more a month.

“If we can get one, it’s sold as soon as it gets here,” said Carl Sewell, chairman of Sewell Automotive Cos., which owns Cadillac dealerships in Dallas and Grapevine. “They sell faster than anything on the lot.”

Consumers began gravitating to truck-like vehicles about two years ago. SUVs, crossovers of all sizes and pickups sizzle these days and will probably lead the auto industry to double-digit sales growth this year, analysts say.

Low gas prices are fueling that fire, helping vehicles like the Jeep Grand Cherokee, Honda CR-V and Ford Explorer record sales increases of 20 percent or more in January.
“People are coming in to look at sedans and going straight to the crossovers,” said Brian Huth, general manager of Five Star Ford in Plano.

The trend is pumping up automaker and dealership revenue but flattening out fuel-economy gains.

The average fuel economy of all new vehicles sold in the U.S. barely rose last year. The fleet average in 2014 was 24.1 miles per gallon, only one-tenth of a mile per gallon better than 2013. In 2013, the average rose half a mile per gallon.

If the trend toward trucks persists, it will put additional pressure on the federal government’s lofty corporate average fuel economy, or CAFE, standards.

Much, much more at the link.

I see a lot of Sewell Cadillacs in my neighborhood. The last car I bought was a 2012 Honda Civic from Ryan Motors, Williston, North Dakota. I think I wrote about that some time ago. It was back in 2011 and, because of flooding, the only way out of Williston  was to drive (Amtrak was out of commission due to flooded tracks). The only option for me was to buy a car, and that's what I did.

I bought the car from Ryan Motors, and had it registered in San Antonio, Texas, where I was living at the time. (A long story regarding the registration.)

A day or two after buying the Honda Civic, I drove cross-country to Boston and gave it to my older daughter (another long story) where she put 50,000 miles on it in about two years. (And they say folks don't drive cars in Boston. LOL.)

The car is now in Grapevine with us and is pretty much used for cross-country driving. On open roads, at about 60 mph, I can get 49 mpg.

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Global Warming? What Global Warming?

Global warming? The Washington Post is reporting:  120-year-old record low broken in D.C., one of many today and in the past week.

We talk about record highs a lot in Washington, but the recently unfathomable was accomplished this morning. We broke a record low.

A temperature of 5 degrees was enough to smash a 120-year-old record for the date — a moment worthy of meteorological reflection.

When the city — often the warmest location in the region — is breaking record lows, you know it’s a cold one.

Much of the area saw one of the most truly frigid nights in recent memory last night, made more amazing because of how late in the season it happened. 

"How late in the season?" What are they smoking. It's the middle of February, generally the coldest month of the year where I come from.

Don notes that the temperatures would have been even colder had NOAA not "seasonally adjusted" them.

Letters From Southlake, Texas -- February 21, 2015

This post will have nothing to do with the Bakken, so if you came here looking for the Bakken, scroll down or click on one of the 1,267 links at the sidebar at the right, most of which concern the Bakken.

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Apple

I'm looking at and working on a brand new MacBrook Pro. Actually, it's the same one I've had since about 2010 but it's got a new battery and it's been cleaned professionally by the Apple store folks. It's so clean, it honestly looks like a new computer.

I mentioned the other day that my hard drive crashed Friday morning. I took it to the local Apple store in Southlake and ... wow, what a great experience .... Plan B was to buy a new laptop, but unfortunately they were able to diagnose the problem and fix the problem on site. It turned out that the hard drive was fine: the cable to the hard drive had "gone bad." It's hard to explain, but apparently the 13-inch MacBook Air is so small, that things get a bit hot, and the cable to the hard drive is one of those things that might deteriorate over time.

Diagnostically the battery was about ready for replacement, so I had that done also.

For those who have never experienced an Apple Store, it's quite remarkable. Even I find it quite remarkable every time I go, and I visit fairly regularly. When I walked in yesterday morning, I was greeted and asked what I needed. I was referred to "Michael" who was in the middle of the store in front of a "virtual counter" where three real human beings were in line, waiting to be seen at the Genius Bar. I didn't have an appointment (I was there at 10:00 a.m. and the next available appointment was 5:45 p.m. that evening. Michael was surprised that I wouldn't mind "waiting stand-by" -- and 35 minutes later a man walked up to me, and said, "Bruce, welcome to the Apple Store. I'm Randy. Let me introduce you to Daniel at the Genius Bar." (The concierge, Michael, who had checked me in, identified me to the Apple manager by text as "old white man, black leather jacket, green back pack, wandering around the store" -- that's how Randy knew who I was. -- Note: some of the names have been changed because I couldn't remember them all.)

Long story short, while I went to Barnes and Noble, Apple fixed my computer, phoned me and I returned a couple hours later to pick it up. My computer had never looked so good; as good as the day I unpacked it for the first time. It does look like I'm on a new computer except I notice the two keys that are losing their color, and I recognize it as mine.

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Trader Joe's

The Kennedy cold front is supposed to hit Grapevine / Dallas / Southlake tomorrow night, and it was supposed to be a bit cooler today, but it turned out to be a wonderful afternoon, so I biked to Trader Joe's, exactly 6.0 miles from the Grapevine apartment. It's 5.5 miles to Starbucks and another half-mile to Trader Joe's. The Southlake Trader Joe's opened yesterday; the parking lot was full; traffic control provided by uniformed police. Today the same but I was able to bike to the front door.

The store was very, very crowded -- shoulder-to-shoulder -- but not as bad as a typical day at Disneyland. I assume it was about as crowded as Disneyland on Tuesday morning the week they revealed there was a measles epidemic in the park.

Surprisingly the shelves were all full; it appeared they had not run out of anything. Obviously very, very well prepared.

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Swim Suit Sale

I didn't buy anything at Trader Joe's; I was only in the store for about five minutes. It's a typical Trader Joe's. I will return when I need something. Then a bike ride to Starbucks to write this.

Passed "Everything But Water" which was having a swimming suit sale. I did not stop. Men are from Mars, women are from Venus; women buy their swimming suits from boutique stores like "Everything But Water"; men buy their swimming suits from Walmart or JCP.

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Soccer

Our middle granddaughter, 8.5 years old, played two soccer games today. The first game this morning was "recreational." Our team won, 3 - 0; our granddaughter scored all three goals.

This afternoon's game was "Premier League" -- invitational only -- for all the marbles -- trophy competition at the end of the season -- every game counts towards "seeding." This is the "big league.' Our team won 2 - 0, and almost 3 - 0. Soccer is an interesting game. The "better" team doesn't always win. Our team was clearly the better team but we easily could have lost. I'm sure soccer mom knows what I mean.

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Pick-Up Trucks

I don't know if folks have noticed -- it's hard not to notice: pick-ups are getting bigger and bigger. In Texas they are really getting big. I never understood it; with the CAFE standards I thought automobile and light truck manufacturers would have been forced out of the "big pick-up" business. It turns out that, in fact, things changed. The change must have been seen by no one except the light truck manufacturers. BloombergBusinessweek has a huge story on why pickup trucks are getting bigger and bigger. The fact that BBW did a story on this suggests to me that a lot of folks were caught unaware. The link to the story is here. 

Many, many story lines. It has to do with CAFE standards which some doctorate student figured out in 2011:

Kate Whitefoot, a researcher at the National Academy of Engineering, came to believe that the new CAFE rules were tilted in favor of large pickup trucks while working on her doctorate in design science at the University of Michigan. In a 2011 article in the journal Energy Policy, Whitefoot and a mechanical engineering professor, Steven Skerlos, concluded on the basis of computer simulations that it would be cheaper to meet the new standards for big pickups than for small pickups, SUVs, or cars. “The goal of the policy was that vehicle size wouldn’t change at all,” Whitefoot says. Instead, “We’re seeing that it clearly is going up for trucks.”

Light truck manufacturers are reaping huge benefits from the new CAFE standards and their goal is to put every American in a pickup truck (although that's a bridge too far in Boston).

If you're read this far, then consider this, some dots to connect. Regular readers know that there will be a relative shortage of oil in 2017, possibly as early as 2016, as the majors shut down / delay / cancel "big cap" projects in 2014/2015 due to the slump in the price of oil.

Now, add that to the fact that auto and light truck manufacturers are out to put every American in a big pick-up truck. Those big pick-up trucks are gas guzzlers.

So, a perfect storm for some folks in 2017, maybe in 2016, certainly by 2018.

But it gets even better for oil and gas investors (see disclaimer): the CAFE standards that favor big pickup trucks (and possible bigger SUVs) do not change until 2022.

The NHTSA says it will look at the rise of big pickup trucks as part of a review of the CAFE rules that will apply to model years 2022 to 2025. That review doesn’t have to be finished until 2018, but the skirmishing has already begun.

But regardless of the new rules, they don't come into effect until model years 2022. That's seven years from now. Seven more years during which light truck manufacturers will try to get every American into a pickup truck. With an Apple dashboard.

For those who survive the current slump in the oil and gas industry, 2017 - 2022 should be awesome. That's still within my investing lifetime.

Again: see disclaimer.

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Rocky Week

Wow, talk about a rocky week for investors -- maybe "rocky" is the wrong word, but certainly a strange week. I don't think I've seen such negative news in such a long time (at least not since November, 2008): the Dubai Torch lives up to its name; Iran is one week closer to going nuclear; Greece all but defaults; the Russian separatists take more ground from the Ukrainians; ISIS is declared a non-Islamic terrorist group; the entire west coast port system shuts down for four days; a Texas judge stands up to the President on amnesty; Health and Human Services sends out 800,000 botched ObamaCare forms; the ObamaCare website wimps out; we learn that the Founding Fathers were Muslims; we also learn that the civil war was all about ending Muslim slavery; another Bakken crude oil unit train explodes when it goes off the tracks; the Great Lakes froze over; new cold-temperature records all along the East Coast; and, the Boston light rail system is shut down.

And that was just the top headlines from Drudge and Savage Nation.

And at the end of the week, how was Wall Street doing? First time unemployment claims plunge (bad news for the market; makes it easier for Janet Yellen to raise rates) and the market hits new records. Warren Buffett dumps XOM and buys DE.

But wow! The market hits new records. It appears, for those new to investing, the only thing young investors have to fear is ... Greece.

Greece: whose GDP is less than that of Williston's.

Demand In-Destruction -- December 26, 2014

When gasoline was approaching (and occasionally exceeded) $5.00/gallon, there was much talk about "demand destruction."

So, what's happening to gasoline consumption / demand destruction as the price of gasoline slides?

First, this spreadsheet at EIA. Some observations:

• the data is current through the end of 2013
• this is "gasoline supplied," not consumed, but one has to assume that most/all gasoline supplied was consumed
• it appears the record consumption was 3.389 billions of gallons of gasoline in 2007
• after 2007, US consumption decreased from that peak for any number of reasons
• for the most recent full year reported, 2013: 3.228 billion bbls

Now, to 2014, the weekly consumption (demand) for gasoline in the US, scroll to the very bottom of that page:

• the graph is AVERAGE; the spreadsheet below the graph is million bbls/day
• look at the graph first: for 2013, this time of year, about 8.75 million bbls/day, AVERAGE
• for 2014, in December, reaching 9.5 million bbls day (daily, spreadsheet)
• the trend has been rising every month since September (with one exception)
• the delta between 2013 and 2014 during the LOW driving season is widening
• I can't tell for sure, but it appears that we are now exceeding the record set on Memorial Day weekend and early June, 2014

Now look at the numbers:

• one year ago: 9.176 million bbls/day (spreadsheet)
• today: 9.518 million bbls/day (spreadsheet)
• 9.518 - 9.176= 0.342/9.176 = 3.7% increase year-over-year
• take the high point this month, 9.518 * 365 = 3.474 billion bbls annual rate
• 3.474 (current annual rate) - 3.228 (total consumed 2013)/3.228 = 7.6% increase
• until recently, the record amount of gasoline supplied was in 2007, at 3.389 billion for the year
• compare that with the current annual rate (during the LOW driving season): 3.474 billion

It's hard for me to believe that gasoline demand won't increase (all things being equal) by Memorial Day, 2015, for at least two reasons:

• lower price at the pump will drive more consumption
• US economy is improving (most recent GDP at an astounding 5% growth rate)

It would be telling and it would be ironic and it would be notable if US gasoline consumption hits a new all-time record in 2015, despite the CAFE standards, the slow economy, the EVs, the hybrids, the Teslas, and the shift to smaller cars.

For a 30-second sound bite: 8.75 million bbls/day of gasoline supplied in 2013 vs current 9.25 million bbls/day during the LOW driving season today.

I mentioned a few weeks ago that of all the metrics I follow, this one (US gasoline demand) will be one of the most interesting. My hunch is that we will set a new record for gasoline consumption by Memorial Day, 2015, if the economy keeps growing and the Saudis keep giving away their oil for $50/bbl. And despite the conclusions reached by the authors of that silly Bloomberg story, December, 11, 2014.

The record was 2007: 3.389 billion bbls for the year = 9.28 million bbls/day. Now, during the LOW driving season, 9.518 million bbls/day.

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