Slide in Gas Sales at U.S. Pumps Signals Demand May Only Worsen

(Bloomberg) -- As more Americans are forced to stay home in a bid to ward off the coronavirus, the adverse effects on gasoline demand are beginning to surface.

Average weekly gas-station sales volumes dropped 3.2% year-over-year in the week ended March 7, according to IHS Markit’s Oil Price Information Service survey of retailers nationwide. That was even before the U.S. government ramped up domestic efforts to contain the spread of the virus.

While the survey data showed a slight increase from the previous week in the average volume of fuel sold, that bump is seen proving temporary. With more cities now adopting policies that push people to stay off the roads, consumption is set to weaken.

“Gasoline demand hasn’t seen the full scope of the hit yet, it’s too early,” said Patrick DeHaan, head of petroleum analysis at GasBuddy. “As the reality of the outbreak sets in, and gas is cheap, people are filling up their tanks. But in the next few weeks the real impact will sink in. We can’t see around the corner but I think the cliff is there.”

Regionally, stations in the West saw the largest decline in volumes in the first week of March, falling 5.3% compared to last year. Washington state was the first in the U.S. to report a case of COVID-19. Since then, it has seen one of the worst outbreaks in the country with the largest number of cases before being surpassed by New York this week.

Gas retailers in and around the Seattle area have seen sharp drops in demand versus a year ago, by double digits in nearly all cases.

Gasoline futures sank to the lowest level since 2005 on Monday. As lockdowns and quarantines descend upon more U.S. cities, fewer people on the road could shave as much as 50% from fuel demand, said DeHaan of GasBuddy.

“It’s not unusual to see an up-tick in fuel sales before a time when people need to hunker down. We’ve seen this behavior before with Hurricane Sandy and Harvey,” said Brian Norris, executive director for retail data and product management at IHS Markit. “We are just at the tip of where this is going.”

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