Gasoline Demand Is the Lowest in a Year. Blame Remote Work, Not Pump Prices.

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It isn’t just high oil prices, but Americans working from home that has led to overall low demand at gas stations, RBC Capital Markets said Thursday.

The national average gas price at the pump is $4.605 a gallon, up from $3.147 a year ago, according to AAA. At the same time, the U.S. average for product supplied—a proxy for demand—is at 18.7 million barrels a day, its lowest since June 2021, according to the latest weekly data from the Energy Information Administration, or EIA.

But don’t blame high gas prices for the demand destruction, says Michael Tran, global energy strategist at RBC. Rather, it can almost be entirely attributed to the hybrid work environment, he says.

The current consumption patterns, according to Tran, are structural and not transitory. Somewhere between 4% to 6% of gasoline demand has been almost permanently destroyed in the era of hybrid and remote work, he told Barron’s.

He breaks down the math in his latest note. The five-year average of gasoline demand leading into the pandemic was 9.28 million barrels a day, Tran said, citing EIA data. Out of this, 2.6 million barrels, or 28%, typically get attributed to demand from Americans’ commutes to and from work. U.S. gasoline demand, however, has lagged an average 5.3% below pre-COVID levels so far this year, Tran said. He believes that the bulk of that gap, 5 percentage points, is from remote work. Using those numbers, “we can conclude that 19.1% of commute-related gasoline demand is lost,” he said.

Considering the hefty chunk of lost commuting demand, Tran argues that barely any of the blame for reduced demand can be placed on the high gas prices this year. However,, prices will remain elevated—despite low demand—because of low U.S. crude oil inventory levels, he says. Levels ticked up recently to about 427.1 million barrels, but still remain 5% below the five-year average for this time of year, according to Wednesday’s EIA data. This figure excluded the volume from the Strategic Petroleum Reserve.

Write to Karishma Vanjani at [email protected]