MasterCard Advisors estimates retail gasoline demand based on aggregate sales activity in the MasterCard payments system coupled with estimates for all other payment forms.

It looks like this refers to all gasoline purchased, not just credit cards. I don't know how good the data is, but it does seem clear Mastercard is presenting it that way.

For the last three months or so I've seen it.

when I fill up. and I always fill up now, I look at the other pumps.

The prices are always, $10, $15, $20.

The diesel $15, $20, or $154 (guess they've got a job
or run to make).

Demand Destruction is Economic Destruction.

Robert Rapier's trip from Wyoming to Texas very illuminating.

or maybe, more people are paying WITH master card because they ran out of cash. that maxed out credit stereotype does not apply to everyone. i happen to believe that demand is dropping, based on antecdotal evidence, and the fact that i personally have cut down. not because i have to, but because i live below my means.

if one takes a look at the period 1979 to 1984, 5 yrs, there was a lot less demand, so it didnt happen overnight.

Leanan,

> Many have had their credit cut off due to fallout from the mortgage crisis.

MC would filter for people who had a cc back then and still have today.

About the same correction that a.o. WalMart makes when they publish their earnings: Increase/decline of sales for shops open more than 12 months (existing stores)

So I would be surprised if they would fall for that.

This is a very good article - Just because a car is small and fuel efficient, it does not need to be spartan. Most luxuries like moonroof and leather upholstery ought not to have any effect on fuel economy.

To some extent what the Prius offered Americans was their first chance to buy a fuel-efficient car that has lots of fancy features and costs a lot of money (and has some sort of status-symbol status), rather than a car that gets good gas mileage as a side-effect of being small and cheap and devoid of luxury goodies (and is obviously cheap and 'low-status'). You need only glance at the road to see that most vehicles are not sold on the basis of being the cheapest possible option determined by strictly rational financial calculation. Not too surprising that with some financial push for better fuel economy and some fashion change from 'I'd look cool in a pickup' to 'I'd look foolish in a pickup' people are buying fully-loaded minis and whatnot. Not to mention manufacturer push to make the higher-profit option-laden versions of the now-hot models. Just try to get a base-model Prius.

One really interesting part of that article is the last paragraph:

“I’ve never seen anything like it,” Mr. Smith said. “You don’t have too many people saying, ‘It has to be white with a power package and it has to have Michelin tires.’ Instead it’s, ‘What do you have and can I get it by the end of the month? Just get me out of my Tahoe.’”

Most Americans can technically afford $4, $5 gas. They could just give up something else and keep guzzling.

But for many that choice increasingly starts to really really suck because they see money going up in smoke that could be spent elsewhere. If you get rid of your Tahoe, you instantly see the savings at the pump.

If you spend less money on gas, you will have more money for other things. That's why I think the term "demand destruction" is a bit overdone. For most Americans, lowering your demand for gas means increasing it for other things.

Bingo! And even if diesel demand is down in the US, it is still rising in the rest of the world as a whole. Now, it may slow as the US-induced financial mess spreads to the rest of the world, but it will affect countries with strong currencies less, and it will affect oil exporters less still (and I'd include Brazil in that, even though it is a marginal importer).

But, the decision of the refiner to buy (bid up the price of) an extra increment of oil depends on his overall expected profit from selling the basket of products. If the price of gasoline goes down, he has to get more for the diesel (and other products) he sells, or else his profit deteriorates. Every product in the mix affects the price he is willing to pay for oil. If demand for gasoline decreases, the expectation would be that diesel and other oil products go up somewhat in price, and oil demand decreases somewhat. This assumes of course there there is some demand elasticity for these other products.

The Hairless Prophet of Doom on CNN this morning was all smiles, because of the drop in oil prices. The anchors weren't impressed, though. One of them said, "It's because the economy's collapsing!!!!!"

I have no doubt that the US can destroy 10% or 20% of demand fairly easily. But continuing a 5% rate of demand destruction over time will become increasingly difficult. I'm not saying it won't happen, but that one of two things will be required to make it happen: steadily increasing oil prices, or steadily declining economic situation.

What do you call a 14x price increase in a decade?

Against that, oil demand is much more elastic in the long term than the short term. Moving, changing jobs, buying a new car...Even at $3/gallon people included gas costs in the mix. When you're doing one of the above anyway it's low hanging fruit to cut your gas usage 10%. I'd swag those items as an ongoing 2%/year cut for the next ten years even if gas falls back some.

samuM -

I think the term, 'demand suppression' is a more accurate description of what is really going on than 'demand destruction', which to me has a certain permanent connotation. If oil suddenly went down to $40/bbl, this 'destroyed' demand would have to miraculously come back to life.

The problem is that China is still subsidising the price of oil. So there will be no demand destruction, indeed it could go on rising. the only hope is that the Chinese economy slows down and subsidies will become unaffordable.

From a quick comparison of US consumption versus oil price (price histories on www.wrtg.com and consumption somewhere here on TOD), it seems apparent that from WWII to the late 90's that any shock rise in oil prices was immediately accompanied by a fall in US consumption. In the absence of a such upward shocks (during the rare drops, occasional plateaus, and many slow rises in prices) consumption trended steadily upwards.

Why is it that since the late 90's vast increases in price have not been accompanied by reductions in consumption? Either we grew so rich it didn't matter, or the graphs are not accurate. The only easy explanation I can imagine for a display inaccuracy is the inflation adjustment. Is it possible that an unseen dollar devaluation component coupled with a vast inflow of cash has somehow masked the price rise of oil from public perception?

For this to be plausible it would seem that a rush of cash influx from all our creditor nations much have been flowing in to provide us with enough new dollars to mask those we were spending on oil. I'm no economist, and I would welcome a sage explanation for the apparent inelasticity, but it seems to be that we have been trading the equity of our nation for oil (the area under the consumption multiplied by price curve), and she's just about sucked dry.