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.
“The Millennial generation is leading the change in transportation trends. 16 to 34-year-olds drove a whopping 23% fewer miles on average in 2009 than in 2001— the greatest decline in driving of any age group. In addition, Millennial's are more likely to want to live in urban and walkable neighborhoods and are more open to non-driving forms of transportation than the older generation of Americans.”
The report finds that under any reasonable scenario, the number of miles driven annually will be far fewer in the future than if the Baby Boom trends had continued. During the second half of the twentieth century, low gas prices, rapid suburbanization, and an ever-increasing number of women commuters entering the workforce fueled the Driving Boom. The factors that defined that period have since taken a back seat. Under some conservative scenarios outlined by the report, driving won't ever regain its 2007 peak during the range of the study, which extends to 2040.
Yet, government forecasts of future vehicle travel continue to assume steady increases in driving, despite the changing trends seen over the past decade. Those forecasts are used to justify spending vast sums on new and expanded highways, even as repairs to existing roads and bridges remain neglected, and even as public transit systems with growing ridership face cutbacks. "America's transportation leaders need to wake up to the momentous changes that have taken place over the last decade," said Baxandall. "The infrastructure we build today will mainly be used and paid for by the Millennials who are leading the trend away from driving." The report examines a number of high-profile official transportation forecasts and finds a consistent pattern of overestimating how much Americans will drive. The official forecasts examined all fall above even the most conservative scenarios forecast in the report and all seem to be based on the assumption that the ongoing driving growth of the Driving Boom will last forever. The change in driving trends will have huge implications for many aspects of Americans' travel life:
Coupled with improvements in fuel efficiency, reduced driving means Americans will use about half as much gasoline and other fuels in 2040 than they use today, making the real value of gas taxes fall as much as 74%. Gas taxes provide the chief source of federal transportation funds and a major source for many states.
Traffic congestion will be less of a problem.
- Toll roads will be less financially viable.
- Many highway expansion projects will start to look like wasteful boondoggles.
- Forms of travel that are expanding in use, like public transit, will be a better investment.
And to add my 2 cents we will see electric and natural gas cars that will further reduce the demand for gasoline. Millennials staying closer to home will chose electric and nat gas autos when they become more available.