Fuel Demand and Prices Slowly Rising
When Shelter in Place orders in response to COVID-19 brought business and the economy grinding to a near halt, the effect was felt dramatically within the fuel industry. With demand falling off significantly, things got worse as a price war within the OPEC+ group sent prices plunging.
As quarantine orders eased and business started ramping up again in the last month, the picture started to improve although the numbers are still far off pace. The U.S. Energy Information Administration (EIA) showed nearly a 50% drop in demand for both gas and diesel from early March to April 2020. While those numbers have improved and are edging closer to pre-COVID numbers, price has still not caught up. Gas prices are still about 50 cents off from the same time last year while diesel is closer 70 cents below.
Although the rise in demand and price (albeit slow) is promising, large spikes in Coronavirus cases as states rushed to reopen may affect numbers, especially if those communities roll back to control numbers. Even more troubling is the inconsistent message coming from State and Federal leadership regarding the likely course of action to respond to case surges. While the economy cannot survive another shutdown and is unlikely to pursue that course, some scaling back is certain which will have an effect on overall fuel demand.
July will likely be a key indicator in the the spread of the virus in the U.S. and our response, as well as its impact on business and the economy in general.