The drop in fuel consumption continues. The Wall Street Journal reports that "gasoline consumption dropped 3.3% from last year to 9.347 million barrels a day." This puts current domestic gas usage at the lowest level since 2003, effectively rolling back five years of growing demand. Consequently, fuel supplies at refiners are growing, up by one million barrels in the last week alone. Of course, compared to 9.347m barrels per day of consumption, having an additional million barrels in inventory is hardly a glut. The reduced consumption started with a one percent drop (compared to last year) during April, ramped to a 2.2 percent drop in June and then hit 3.3 percent during the week surrounding the 4th of July. But, while consumers are cutting back, trucking and farming are doing the drunken sailor routine. U.S. diesel consumption is up a full six percent compared to last year– even though diesel fuel prices are up 65 percent while the price of gasoline rose by only 38 percent. Ironically, some of the boom in diesel fuel use is down to increased ethanol feedstocks and the fleet of tanker trucks required to move the stuff around. (Gasoline can be transported over long distances in pipelines; ethanol has to go one tanker truck at a time.) As for the clean diesel car revolution, dead on arrival.
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Price goes up, consumption goes down. As far as I can tell, there are no shortages, no lines going around the block.
Nice graphic, by the way.
Geez, I wonder if I can use gasoline to heat my house, instead of #2 heating oil, this winter
You said:
As for the clean diesel car revolution, dead on arrival.
Huh? Please explain to us how you have drawn that conclusion? Clean Diesels haven’t been expected to arrive here in the USA for another year or so. Only VW is offering anything here yet, and they are only taking orders, not selling any actual cars to my knowledge. Mercedes still only offers one model, and the expected BMW, MINI, and Honda Diesels won’t be here until 2009 at the earliest. The clean Diesel car revolution appears to me to still be in gestation, and has several months, if not a full year before arrival.
–chuck
http://chuck.goolsbee.org
You know, despite the high gas prices, business at my grocery store has skyrocketed – we’re doing more business than the store’s done in nearly a decade. Just last week, we did over $700,000 in sales for the week – averages out to a little under $3 million a month. For a store in a small Eastern Ontario town, that’s pretty freaking good.
Anyway, the point is, if people are buying more groceries everywhere, that means more trucks are being used to deliver more product to more stores more often. Which results in a huge increase in grocery shipping costs. If people are saving money on gas, they seem to be spending more on groceries and other goods.
“Just last week, we did over $700,000 in sales for the week”
Are you selling more product, or just enjoying the financial upside of inflation? With the prices of groceries skyrocketing, it isn’t surprising that your sales revenue is up. But, how about the number of actual items sold? And even that count can be deceiving as makers reduce the quantity of goods per package. For years, at least in the US, ice cream was sold by the half gallon. Suddenly the “standard” container went down to 1.75 quarts. Now it is transitioning down to 1.50 quarts. A carton of ice cream has fully 25% less in it now than it did two years ago.
“… how you have drawn that conclusion?” (re: diesel car DOA)
My reasoning is simple. The cost of diesel fuel is now well above that for premium gasoline and far above regular gas. Much of the fuel economy advantage of a diesel car is neutralized by the price premium for it’s fuel. Add the historical reluctance of US mass market consumers to buy diesel cars, the price premium for a diesel engine vs. gas, and the steep price:performance learning curve hybrids are just now in the middle phases of and it adds up to a horrible time to be bringing diesel cars into the US market. As a side note, the company which hopes to make them a mass market phenomenon in the US is none other than VW, and VW’s US efforts have been even more badly managed that those of the Detroit legacy automakers.
So yes, I’m going out a little on a limb here, but I do think clean diesel cars are already DOA in the US. I wonder if Honda is going to go full speed ahead with it’s US market clean diesel plans. They must still be licking their Accord V-6 hybrid wounds. If I were in Honda management all my efforts would be behind making lighter, more efficient gasoline engined cars and hybrids.
lprocter1982 Says:
You know, despite the high gas prices, business at my grocery store has skyrocketed – we’re doing more business than the store’s done in nearly a decade. Just last week, we did over $700,000 in sales for the week
Big question – are you doing more volume, which is leading to the record sales, or are you simply seeing higher prices for goods driving the record sales?
More volume is generally good. Higher prices for the same goods is not good. Both can lead to record sales, which is why that, in and of itself, is not a useful indicator of economic health.
Also, higher volume can be due to a higher population, but the same (or less) per capita spending.
Bruce
While we can’t judge the whole diesel car revolution before it’s started, we do have some reference points for what’s happening now.
Heavy Duty pickup sales: Diesels used to account for about 75% of Ford’s SuperDuty sales. It’s down to about 60% and still shrinking as diesel prices sky-rocket. Similar shifts have been seen at GM and Chrysler.
The used-diesel market: They just aren’t moving. The values of these vehicles have declined even more rapidly than regular trucks.
Why? Well, for the new trucks, technology used to meet emissions requirements on such large engines have lowered the overall mileage. That combined with the high cost of entry and fuel that is running almost $1 more per gallon is hurting.
In the used market, it is all the cost per gallon. Although older diesels without all the emissions systems were sometimes drastically more efficient (the 6.0 Powerstroke often returned 17 mpg for people in their Excursions versus 12 in the V10, for example), people are so focused on the cost of fill-up and can’t rationalize through the real cost of owning a diesel.
I don’t think the diesel revolution is dead, but my guess is its legs aren’t as strong as some have predicted. VW was claiming 40 mpg combined for their Jetta, but the EPA gave them 30/41. Even if you can reach 40 mpg combined, they have to advertise and people will make their decision based on 30/41, which, frankly, isn’t as drastically higher as VW needs in order to sell the diesels at a higher price. Honda is claiming over 50 highway for their diesel, I guarantee they won’t get much more than low-40s out of the EPA. The BMW X5 is rated at 19/25. That’s not particularly good compared to other vehicles of similar size.
Right now, we’re still trading emissions and mileage in diesels. And with diesel at $5/gallon, the right balance just isn’t there to entice a lot of shoppers, in my opinion.
this is GREAT!!!!!
hopefully fuel consumption rates reduce further.
Shame about the price of diesel. Shame about the apparent stalling of new Diesel introductions.
Still, my nice, roomy wagon is happy to go 35 miles on a $5 gallon of fuel. It really isn’t so sad.
I’m getting mid to upper 40’s for fuel economy in my old ’03 Golf TDI. Even paying $5/gallon I still think I’m better off with the Diesel than a gas car for my commute of about 450 miles per week. At the current price a fill up costs $60 – 65, but I’m only doing it once every 7-8 days.
Then why are used Diesel Jettas and Golfs holding their value? I’m contemplating on whether get one with the intent of using bio fuel or recycled restaurant cooking oil. Anyone with experiences to share?
Running BioD or Used Veg are on the rise.
I because of lack of space living in a Tenement apartment I cannot do the filtering of UVO.
I do buy from a guy for ~50c /litre of filtered UVO.
I have to mix 50/50 for cold season & 75/25 for warm season.
Living in Vancouver is not such a cold front here.
I am running on a pre 86 Merc 300sd. It does gave a nice smell, now exhaust doesnt stink and gave u ” Hungry pang” as quote from our Governator
Arrnold.
Diesel is not DOA in this remote part of DEW line country Republic of Canuckstan.
In US I hear a lot of Green folks are running UVO iis catching the critical mass pretty soon.
Diesel Jettas and Golfs holding their value? I’m contemplating on whether get one with the intent of using bio fuel or recycled restaurant cooking oil. Anyone with experiences to share?
Do a more dilligent research, if it F*cks up your inj pump it wll costs big time. So be lttle more careful.
BioD as they conform to the standard so it should be OK.
One advantage to diesel fuel is that it is a commercial fuel, less likely to be subject to rationing in any sort of energy crisis. That is an absolute worst case scenario, and not sufficiently probable to influence my next car purchase. Fingers crossed that Honda has not screwed up the new Fit, early reviews are promising apart from low speed steering feel.
@ John Horner
Inflation is not yet an issue in Canada. Most recent government estimates were two percent. Possibly this is an outright lie, but we aren’t getting hammered–it’s coming. My beloved jasmine rice from Thailand has doubled in price, for example.
Fuel costs, fertilizer costs, raw material costs, economy too closely linked to the US and the soon to surge value of Asian currencies (and therefore goods) are going to hit us to some degree. As our housing market dips, I suspect Canadians will start feeling apprehensive. I don’t relish the market open tomorrow either.
Fasten your seatbelts, as they say.
“Inflation is not yet an issue in Canada. Most recent government estimates were two percent.”
Check to see if your government “adjusts” the reported inflation numbers with questionable judgment factors. The reported US CPI makes all sorts of adjustments for “substitution” and “quality improvements” and “seasonality” in order to cook the numbers.
If the price of beef goes up, the government assumes people will switch to chicken and then compares what they are paying for chicken today to what they paid for beef last year. But, if the price of beef later comes back down then that decrease counts in lowering the overall reported numbers. If car prices go up due to mandated safety features then they say the price didn’t really go up because you are getting more value for your money. If the statistical team says that the value of the safety devices is greater then the increased price then they may report that the price of cars went down when in truth they went up. Even more strange are the adjustments made for perceived value of a brand name. Thus a Pontiac G3 is “worth” more than a Chevy Aveo because Pontiac is a higher status brand. If GM sells more G3s and fewer Aveos and sell them at the same price then the statistics will reflect a reduced cost of new cars thanks to the “free” value of the Pontiac name. Ditto buying a fridge with the Kitchen Aid label instead of Whirlpool, even if it is the exact same unit.
In April of this year gas prices in reality jumped 5.6% compared to last year, but after the gov’t got finished with it’s seasonal adjustments they said gas went down 2%. Why? Because the increase from March to April this year was a smaller absolute percentage increase than had been historically reported from March to April. Spend some time reading papers on the BLS website and you may well end up shaking your head in amazement and confusion. ( http://www.bls.gov/cpi/cpiaudio.htm for but one example )
I, for one, am fed up with the government telling me that inflation is minimal to non-existent while the price of essential things like food, energy, insurance, medical care and education continues to go up and up. The bottom line is that the simple government reported inflation number you see in the newspaper is for all intents and purposes a fiction.
@John Horner
Plummeting housing values and truck prices could also act as a damper on inflation, without it ever being an economic plus.
I am watching inflation like a hawk. In the US, the government is lying out its ass, the numbers are not credible, they are political. In Canada, higher commodity prices have been offset by the recent spike in our dollar, and the price decline of manufactured goods and electronics. Again, I think we are in for it, but our government would actually be better off painting a gloomier picture, in order to smooth out the inevitable decline.
Thanks to our energy and resource rich economy, the Toronto Stock Exchange is actually doing pretty well as an index (predictably financials are taking a beating). Still, it’s hard to imagine we will avoid a serious thrashing.
As an aside, I went heavily into precious metal stocks in December, but have still been shocked by dramatic commodity spikes. To some degree they can be explained by nations wanting to spend their USD reserves before values crumble further. Bailing out Freddie and Fannie will do that. Not bailing out Freddie and Fannie will do that.
“In the US, the government is lying out its ass, the numbers are not credible, they are political.”
What an excellent summary, and I agree with you!
The CPI fraud is criminal. Cuts the income of those dependent on social security, etc., and lowers the increases in the TIPS bonds. Looks like some politician would be a hero on this one.
Iprocter1982: You know, despite the high gas prices, business at my grocery store has skyrocketed –
It may be because of high gas prices. People are not driving as far to go shopping at big (but more distant) discount stores; they’re staying closer to home to shop. Small-town businesess are seeing a substantial jump in sales.
# lprocter1982 Says:
July 13th, 2008 at 1:22 pm
You know, despite the high gas prices, business at my grocery store has skyrocketed – we’re doing more business than the store’s done in nearly a decade. Just last week, we did over $700,000 in sales for the week – averages out to a little under $3 million a month. For a store in a small Eastern Ontario town, that’s pretty freaking good.
Anyway, the point is, if people are buying more groceries everywhere, that means more trucks are being used to deliver more product to more stores more often. Which results in a huge increase in grocery shipping costs. If people are saving money on gas, they seem to be spending more on groceries and other goods.
I recently read that grocery retailers as a whole are seeing significant sales increases based on two different factors that are both related to fuel prices. First, the increased cost of transporting food (or any goods) to retail stores results in higher retail prices. The second, and possibly more significant reason, is an increase in sales volume because many drivers have reduced or eliminated eating out. It’s probably the easiest area to cut back and one of the most significant savings, especially for families. I’d be interested to see how restaurants are faring these days.
John Horner:
One reason why inflation has been minimal (so far anyway) in Canada is the rise in the Canadian dollar – from the low 60 cent range several years ago to approximate parity now. Prices of imports, food from the U.S. in particular, have not increased.
As for calculating the CPI – there are three kinds of lies – “lies, damned lies and statistics”.
Well… it’s not the statistics themselves that are bad. It is how they are used by the liars (ie – politicians). For example, inflation was traditionally defined as the price of a bundle of goods households generally consumed. That included food, gas, cars, houses, education, travel, some technology (radios and tubes in the day, plasmas and iPods today). There arose, at some point, diffculty in determining continuity as time went on and new technology “changed” our standard of living, so some conversion assumptions were made. OK. Fine. But then, to smooth out the CPI for the sake of government programs, the concept of “core” inflation was introduced – which excluded food and energy, which were subject to greater levels of instability and speculation.
The statistics have not lied. The “core” inflation of goods and services not in the food and energy bundle have only increased slowly over time. Our clothes are actually pretty cheap now. Housing has lost a lot of value in the last year, which helps keep the “core” number low – although that’s not helpful if you’re not buying a house – medical care has slowed from its double-digit increases, as has education in many cases. Even with the recent fare hikes, air travel is still vastly cheaper than 30 years ago.
The problem arises when there is a structural increase in food and energy prices. It’s fine to consider them non-“core” for a year while a flood in the midwest boosts corn and beef prices. It’s ok if there is a hurricane and energy prices briefly spike to reflect it. However, if this is structural change, yeah, these inflation numbers are full of it. But that’s how the statistics are used. It’s amazing what partial statistics can obscure and at what great lengths people in our government will go to obscure them.
Another element of the CPI fraud is the BLS’ use of “owner equivalent rent” to determine housing costs instead of the actual cost of housing. That particular bit of gamesmanship started in 1983.
http://preciousmetalzone.blogspot.com/2007/09/cpi-fraud-directly-linked-to-subprime.html
From the BLS: “Rental equivalence measures the change in the implicit rent, which is the amount a homeowner would pay to rent, or would earn from renting, his or her home in a competitive market.”
Thus is booming markets like California, Phoenix, etc. where the rental rates for a given property have long been as little as half what would be required to cover the mortgage, the BLS simply ignored the run-up in prices.
The process of calculating the CPI is full of sleight-of-hand. The news organizations lack the depth to report on what is really going on and simply report the government’s numbers as if they are facts.
Lets see, more people are using public transportation and they run on diesel.
So do ya think diesel consumption will be up?
i dont drive as much as i used to. And i use some hypermiling techniques to improve my commuting economy, so that i now get about 40 mpg in my ’95 VW.
I no longer take it out to the woods and flog it, i take public trans when i can – thankfully its OK around here –
its all very sad tho.
And most uncomfortably, i do not beleive that our conservation will make any difference in price at the pump.
I want my next car to get as good milage as possible and still be fun, so i can spend a day playing with it and not have it cost an arm and a leg. I dont even read the reviews of cars with anything more than a 4 cyl engine. Why bother?
One advantage to diesel fuel is that it is a commercial fuel, less likely to be subject to rationing in any sort of energy crisis.
It would be the opposite. With a diesel car, you are competing with agribusiness and commercial truckers for what is available.
We obviously haven’t gotten to this point, but if there is a choice that has to be made between farms that need diesel to harvest their crops, commercial truckers who need diesel to transport food to supermarkets, and some dude with a Jetta TDi, you can guess that it’s the guy with the VW is going to be at the bottom of the food chain.
@Pch101
Let me clarify, diesel fuel will be prioritized over gasoline, in order to keep those very industries going. I suspect the number of personal/passenger vehicles equipped would be small enough to slip through the cracks. Anticipate shortages in gasoline, before shortages in diesel, because it is essential.
Let me clarify, diesel fuel will be prioritized over gasoline, in order to keep those very industries going.
Nobody in government can change refinery output overnight. There is no magic switch to be flipped that is going to suddenly convert refineries to produce more diesel.
There is already a gasoline glut, because most of it is consumed by retail users (us) who adjust their consumption based upon economic cycles. Diesel is more of a challenge for the very reasons that you have already cited — there are commercial users who don’t reduce their consumption as much when the economy turns downward, particularly in countries that have not suffered the same economic downturns that the US has.
The refiners are currently producing at a loss. They are unable to pass on all of their cost increases to the gas stations who buy it from them.
If you are a regular guy who is concerned about future disruptions, you are much better off with a gasoline-powered car. There is more than enough gasoline to go around; the only reason that it isn’t cheaper is because the speculators have gone crazy bidding up the price of the oil that the refineries need.
qa Says:
Then why are used Diesel Jettas and Golfs holding their value? I’m contemplating on whether get one with the intent of using bio fuel or recycled restaurant cooking oil. Anyone with experiences to share?
I have been running on some form of homemade biofuel for about 4 years now. I started with filtered WVO. I had to be anal about filtration (down to 1 micron) to avoid IP issues. You can’t just dump waste oil into your tank and drive. Lots of settling time, heating, and filtering. I would then mix it with #2 Diesel from the pump. My max mix was about 50%, and that was only on the hottest days. If you mix, you don’t have to pre-heat the fuel. If you go straight veggie oil you will have to modify your car to pre-heat the veggie oil to 130°F… then have a second tank of petro-Diesel to purge your lines and pump before you shut off the car. I did end up clogging one of my injectors with VO. Thankfully I’m a reasonably competent mechanic and following a HOWTO from tdiclub.com I was able to swap injector nozzles out in an hour or so.
I started homebrewing BioDiesel about 18 months ago, and it took me about 4 months to get the process down to steady, reliable, high quality fuel. My goal was to be energy independent should Diesel fuel hit $4 a gallon. I arrived just in time. My costs for fuel are now well under $2 per gallon.
The hardest part of VO collecting is dealing with the food service industry, which is more volatile than nitroglycerin. Restaurants change hands and turn over help more often than Bob Lutz says something outrageous. The next hardest part is competition from commercial BioDiesel producers, who now have started paying places for their waste oil. The days of “Free” fuel are gone.
Making BioDiesel is a DIRTY job. I have a barn, out on a few acres in a rural area where I do my processing. I can’t imagine trying to do this in a suburban garage. If you don’t have the space or personal resources to do the work, consider finding a BioDiesel cooperative in your area and volunteering your time. They always need cash, chemicals, waste oil collectors, etc. You get out what you put in, so everyone wins.
Hope that helps.
–chuck
Chuck,
Thanks for your valuable insight. Your co-op suggestion sounds like an excellent idea.
Cheers,
Q
You’re welcome. Good luck!
–chuck
http://chuck.goolsbee.org