Oil may be nearing top as gasoline needs to account for demographics

Getting Closer to the Top

With gold and silver capitulating and Treasury yield rising, oil will have to balance the bearish implications of the Fed talking about an exit strategy versus the disinflation that is now plaguing Europe. Chicago Federal Reserve President Charles Evans said that monetary policy is right now, but suggested that the Fed could end bond buying by the fall. Yet in the short term the oil rally inspired by a Fed juiced stock-market and a rash of refining outages that has made sweet crude seem more valuable, and the sense that the trends in gold and silver have run their course might suggest that oil is closer to the top of the recent run-up.

Of course from a seasonal view point, we really should be near a top anyway. With Memorial Day just a few days away the new normal summer peak for oil should be near. Refining and pipeline issues have conspired to drive up product prices. Refinery outages should lead to another crude oil build putting supplied at a record high! But what may have more impact on the market than tonight’s American Petroleum Institute report and the Energy Information Administration report on Wednesday is Fed Chairman's Ben Bernanke testimony later on Wednesday.

Yet gas prices continue to rise, but should be peaking soon. We know that demand is weakening. We have said that we are entering a new era of lower gas prices and we said that the highs you paid for gasoline a year ago may be the highest price you will ever pay. The Department Of Transportation reports on one of the reasons and that is the end of an era of ever growing gasoline consumption. The DOT reports that in the U.S., travel on all roads and streets fell by -1.5% or a whopping 3.7 billion vehicle miles less for March 2013 as compared with March 2012. Travel for the month is estimated to be 248.8 billion vehicle miles. That is well over 10 billion fewer miles than where we were a few years ago. The DOT says that the U.S. driving boom is "OVER” as the average number of miles driven by Americans heads into its eighth year of decline, and they said that U.S. PIRG Education Fund finds that the slowdown in driving is likely to continue.

Baby Boomers are moving out of the phase in their life when they do the most commuting, while driving-averse "Millennials” move into that phase. These demographic changes and other factors will likely keep driving down for decades, according to the report, "A New Direction: Our Changing Relationship with Driving and the Implications for America's Future."

They say that "miles driven per capita peaked in 2004; the total number of miles driven by Americans peaked in 2007. The average American currently drives no more miles than at the end of President Clinton's first term.

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