The US Motorist Is Unwell: Miles Driven Suffer Biggest Slowdown In Over 2 Years

Tyler Durden's picture

While the media continues to blast the occasional OPEC production-related headline, the reality is that crude supply is increasingly becoming a shale story, as the US, now tens of billions in debt lighter - has rapidly emerged as the low-cost, marginal oil producer. As such absent a sharp rebound in prices in the coming 3 months, OPEC is almost guaranteed to revert to its prior production regime, as Saudi Arabia is already pained by the loss of market share to increasingly lower cost US producers, who as shown in the charts below, have seen their all-in production costs plunge thanks to rapid technological advancement.

And yet, when trying to forecast the price of oil, it is becoming increasingly clear that the answer is not on the supply side at all but rather on the demand, where as we have been writing for the past month, things are getting quite troubling. While we urge readers to familiarize themselves with our recent coverage of collapsing gasoline demand to a level which according to a perplexed Goldman Sachs suggests the US economy should be in a recession...

... other troublesome indicators have emerged confirming that not all is well on the demand side. The latest evidence comes from a recent report by Deutsche Bank which shows that the number of miles driven in the US is not only slowing, but in December, it posted the smallest monthly increase since November 2013.

As DB's Mike Baker writes, "we have hypothesized that the increase in gas prices could pressure miles driven, which as noted below slowed in 2016 versus 2015, and even more so towards the end of the year after the Thanksgiving inflection. The 0.5% increase in miles driven in December 2016 is the smallest monthly increase since November 2014. Gas prices inflected around Thanksgiving 2016 and are up year-on-year on a weekly basis over the last 15 weeks."

While looking at the above chart of year-on-year change in monthly miles driven in 2016 versus the year-on-year change in average monthly gas prices, Baker notes an approximately (60%) correlation. He then notes that the concern is that gas prices were up only 14% year-on-year in December 2016. The reason why this is troubling is that while there is still no concurrent data, the national average price was approximately $2.23 per gallon as of February 27, 2017 and the price per gallon has increased more than 30% year-on-year over the last three weeks.

In other words, if the deterioration in the trendline persists, it would imply that some time in January of February, we got the first negative print in miles driven in years, and would also explain the recent collapse in gasoline demand. 

Some final thoughts from Baker:

Looking back at recent history, while we’ve seen several small pockets of higher year-on-year prices for a few weeks at a time, gas prices have generally been lower year-on-year on a weekly basis for the last three years. The data we are seeing today is more similar to the increases witnessed late 2009 through 2011. While we would agree that economic / employment pressures also negatively impacted miles driven, though perhaps less so into 2010 and 2011, we would note that annual miles driven increased only 0.3% year-on-year in 2010 following a very easy (0.7%) compare from 2009 and then declined (0.6%) in 2011 against the 0.3% increase from 2010. While the absolute price per gallon is considerably lower as of February 2017 relative to 2010 and 2011, we would also note miles driven are much higher relative to that time frame and even a smaller decline on a percentage basis could have a similar impact on the total miles driven.

The implication is that the US motorists' sensitivity to rising prices is now far higher than it was even 5 years ago, when the economy was supposedly in far worse shape. While on the surface that would suggest that something is rather wrong with the financial state of the average US consumer, the more immediate implication is that the higher oil - and gasoline - prices rise, the less miles will be driven, the weaker the end demand for gasoline, and ultimately, the greater the gasoline, and crude, inventory glut as the world continues to produce assuming recent demand trendlines, trendlines which with every passing week, we learn are no longer applicable.

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Belrev's picture

This motorist is so unwell that he decided to fly his truck to save on gas

https://www.youtube.com/watch?v=NRyWaBZTMs0

flaminratzazz's picture

gravity screwed that all up. But again, the american consumer is tapped out..how many times do we have to sort through articles?

The kids got suckered into destroying their futures with student loans, the wages are stagnate plus the 0 interest rates killed savings and the retired is getting their pensions cut..

fvkin winning I tell ya. a mudhut squeeze play..

synergize's picture

Sorry unemployed doom & gloomers but this isnt necessarily an economic slowdown - more people work from home nowadays.  1-2 days a week is normal in the IT world and that simply means less miles driven.

There's a lot of probs with our economy, but this certainly is not the right measure to use...

Some ZH warnings are appropriate while others are simply click-baiting, i've learned long ago to use the good in this site but you gotta know Tyler is all about the negative headlines because they get the clicks.

flaminratzazz's picture

oic, the real economy is eveyone sitting at home writting code and making video games?

Damn shoulda went to skool.

synergize's picture

Dont worry coding is becoming more blue-collar:

https://www.wired.com/2017/02/programming-is-the-new-blue-collar-job/

Salaries will come down in the IT world too but there will be plenty more jobs as regular workers move to IT jobs.  Its really not that hard to do most coding

flaminratzazz's picture

seems to me that AI could kill this industry.. but I am not real savvy on coding.

knukles's picture

Silly, it's because of all the electric cars and superb public transportation facilities in our socialist utopia out here in CA saving everybody else.  You'll all be so sorry when we secede from the union and we lead the rest of the remainder of the free world. 
They'll love us once they get to know us.
Honest.

Texans and other haters don't hate us.  They're just jealous of our freedoms in CA.

/s

prime american's picture
prime american (not verified) knukles Mar 5, 2017 5:04 AM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

Deplorable's picture

Most people do not have the mentality or conviction to move into a new profession that involves coding, and they do not want to embrace the world of tech geeks. You have to have a passion to do this for more than a few years, or the technology will overwhelm you.

People that are accustomed to professions that involve empathy and social interaction are loath to take up coding.

 

BrownCoat's picture

Really not that hard? So why do stalwarts like Target and Yahoo get hacked? Programmers don't seem capable of protecting technical assets.

roddy6667's picture

Maybe they saved money by hiring coal miners for IT guys.

pump trolley's picture

I just love how light the traffic is these days.

GUS100CORRINA's picture

But, but, but ... GASOLINE PRICES KEEP GOING UP. WHY?

Something does not compute.

Giant Meteor's picture

Just as soon as gasoline gets cheaper, due to lack of demand, broke governments raise the tax on it.

Offthebeach's picture

Shop online.  No more driving around town.

 

Maynard G Krebbs's picture

The irony of this of course is buying a car online......

tenpanhandle's picture

Price is still relatively low.  I would postulate that it's not fuel price causing slowdown so much as it is that there is less reason to drive somewhere.  Less people working - no need to commute.  No money in the bank - no can take vacation.  No money in pocket - no can afford to go shopping.  As well, some people with money are buying eletric vehicles.

flaminratzazz's picture

Free delivery with 49 dollar purchase.

WhollyShiite's picture

We just bought 100 pounds of cat litter with exactly that deal. FedEx guy loves us.

izzee's picture

People are not driving because there is no reason. Social media connects. Internet shopping. The only driving is done by commuters on roads so clogged that they spend 2 hours each way every day. Why would they want to get in the car for pleasure.

The "liberal" ideal was to create ways to live without needing the automobile. Now that it's starting to happen there is hand wringing.

And as for gas consumption, was that the other "liberal" idea --- Electric cars, super high gas mileage engines, plan your errand trips to cut down on your driving.

A. Boaty's picture

High gas mileage? Planning errands? Avoiding unnecessary expense? Liberal ideas? I thought thrift qualifies as a conservative idea.

gregga777's picture

There is also the Intellectual Yet Idiot class ruling morons "liberal" ideal of forcing ~96,000,000 working aged Americans from the workforce. How much gasoline do they use to NOT commute to work? /sarc

nachtliche's picture

Yet traffic has never been worse.

flaminratzazz's picture

All those H-1B visas doing jobs Americans wont do.

silverer's picture

No, they do it for less. Americans are now expected to be happy being poor. Sounds like communism to me.

gregga777's picture

Gee, ~96,000,000 working aged Americans are not in the workplace and ~45,000,000 Americans are dependent on food stamps.

Is it possible that those factors play a role in this situation? /sarc

Perhaps our Intellectual Yet Idiot class ruling morons could look into those factors. Maybe shipping 100,000 factories and ~20,000,000 good paying jobs to Communist China is neither a sustainable policy nor a policy conducive to the continuing health and wellbeing of our Intellectual Yet Idiot class ruling morons.

konputa's picture

This author seems to be out of touch with much of the working class. Many, many types of jobs exist without facilities, ie; telecommuting. Why the hell would people be driving more if they're working from home as a call center employee, IT staff, PM or engineer? We can always count on the economists and analysts to miss something that should be obvious if they talked to people or paid attention to hiring.

HRH Feant's picture
HRH Feant (not verified) konputa Mar 4, 2017 7:00 PM

Exactly. I am self-employed and an on-line reseller. I am down to buying one tank of gas every two months. If I can get something delivered, I do. UPS, USPS, and Fed Ex deliever anything I want to my front door.

My idea of a good life doesn't include sitting in traffic breathing fumes.

flaminratzazz's picture

Back in the 70's we would cruise around in killer hot rods sucking up gas by the gallons and that's what we did for fun.

Everyone had fast ass rubber burning tanks from hell. The GTX, 427 vets, I had the 383 mag superbee, then there was the super birds, 396 Chevelle, hemi cudas,  429 cobra, the Ford interceptors, 442 Olds.. on and on..

God I miss those days..

valjoux7750's picture

You can do the same thing today and use way less fuel doing it. My 09 pontiac with a 363 cubic inch v8 (6.0)  gets almost twenty mpg and I don't have a light foot. 

I use around 19 gallons of fuel a week, and as long as gas is under 3.00 a gallon I'm fine with that.

nukegm's picture

im almost 50.

just bought back the car i had in high school - 1970 stage 1 buick gran sport.

late 70s and 80s were so much fun compared to all the tightly wound up people everywhere today.

cheers comrade!

gatorengineer's picture

Here is an example, currently finances are on lockdown, till I find work,  but tomorrow just to get the family out, we are going to the Philly Art institute.  its about a 60 mile each way drive.  Tolls are 6 bucks each way, so gas and tolls are $24 bucks, normally the museum for the 5 in the family would be a little north of $100, but first Sundays its given what you can day. so they will get $20. SO at $44.  Parking will be $20, so $64, we are taking a picnic lunch, to avoid the $100 or so Philly lunch for 5.  So we will drop $64 to go to an Art Museum on the cheap.  

If I didn't do this and paid full boat at the Art Museum and bought the family lunch it would have been over $200 for a day at the museum.  Let me ask how often can people drop $200 for a museum?

flaminratzazz's picture

The money has gone to hell.. 100 dollars used to be all you would need for one hellova crazy weekend.. cant even buy a fvking round of drinks for that now..

I am here to tell you, If you missed being at least late teens in the early 70's you missed out,

Never has there been a better time to be alive, it isnt even half as fun as in those days.

not even close.

Offthebeach's picture

Girls in terry cloth short shorts and halter tops.

Drive Ins and bench seats.

T top Firebirds

Open beer while driving ( I'm fine officer, thanks, good night )

Quarter beer night .

 

 

Kprime's picture

I graduated high school in 1975.  We were in Xanadu and it was heaven.

SheepDog-One's picture

The tree huggers tell us we're supposed to drive less and carpoolmand walk and ride a bike instead of driving, then when we do they're all worried about the plight of less drivers on the roads....SMH...

Stormtrooper's picture

Who drives more than 50 miles anymore?  With the economy absolutely booming, everyone has so much money falling out of their pockets that they buy an airline ticket if they are going any distance.  The government keeps telling me that it is so.

roddy6667's picture

How far does an unemployed person have to drive? To the unemployment office and Job Center? How about that segment of society that still resides in their parents' basement? How far do they drive? And hipsters? Don't they get all their hipster costumes and supplies online?

DaBard51's picture

Priuses and Leafs on the road, hmmm.... Teslas, too...

Joined by other brand hybrids... hmmm...

 

When nine hundred years old you become, look this good you willnot.

scoutshonor's picture

As with the bevarage tax in Philly--I expect we will soon hear politicians shocked outrage that the evil oil companies are passing all these taxes onto their customers.  

Shocked I tell ya!

Bam_Man's picture

It's not the price of the gas.

It's the cost of the auto insurance that's the "elephant in the room".

silverer's picture

Need a new computer for your car? $1,800, please. Bicycle. Better. Healthier. Cheaper. Way cheaper.

wide angle tree's picture

I use the car to transport the bicycle 15 miles to the bicycle trail so I can ride the bicycle 10 miles for fun and exercise. I'm a idiot.

scatha's picture

If you remove top 15% of mileage/per year vehicles,  and only count the miles driven by American people (not a businesses or corps) total miles driven declined 65% from 2007 as well as average age of a car in the US dramatically increased from 6.6 years  in 2007 to  12.4 years in 2015 when another subprime auto-loan bubble began to be blown with ninja loans and a UBER, LYFT etc fad.(now is about 11 years average age of a car in the US)

In fact even those numbers are exaggerated by the sources in insurance companies so they can charge more for higher yearly mileage.

Excerpt from: https://contrarianopinion.wordpress.com/economy-update/

BLOOD ON THE STREET: Why is price of crude oil collapsing?

[The stealth bailout of the dying under the corporate deb,t shale oil companies in 2014-15 comprised of] ..FED criminal actions that encouraged hiding of losses and falsifying accounting statements and [rigging] regulatory reports or giving big banks assurance of support as long as they will pretend that most of Energy companies are worth anything and continued to extend their unpayable loans to a dead industry.

All of that was .. just another form of bailout of TBTF banks themselves, not really related [as much] to Energy companies that are already effectively owned and securitized into a blood of hungry bankster zombies using Saudi Royal family erratic struggle to survive a calamity of abandonment by collapsing US empire.

This political tantrum of a Saudi puppet elite, unable to stop a global demand collapse is threatening Saudi Arabia’s very existence and drives market instabilities aimed to pry the rest of capital out of somewhat independent hands.

What people do not understand is why price of crude oil is falling. It is not because Saudis manipulation against US shale industry or Russia or Iran.

It is because of US manipulation of global financial markets over last .. several .. years by recalling all the US$ dominated capital assets from EM, including BRICS, just to collapse them as a part of US imperial offensive. ..[and propaganda of raising rates and a hype about Trump suppose fiscal stimulus] serves that purpose.

The EM countries and some DM like Brits responded by opening currency swaps lines and devaluating of their currencies vs. dollar to keep competitive in the global trade (ex US). What it is actually caused by, as I described before on this blog, is a shortage of US$ funding for commodity trades [which only will get worse since US$ denominated global trade is facing secular collapse under a tsunami of global income collapse and and hence destruction of global demand  generated by bottom 90% of world population.]

In other words dollar rise was primarily due to dollar funding shortage (no need to sell as many dollars to trade globally) [and three year's old propaganda of interest rate hikes in the US while world eases] and not an increase in demand for dollars since dollars were no longer needed where swaps were available.

And secondly due to repatriation of US$ assets based on propaganda of US robust domestic recovery  [and a Trump political factor] and consequently, a steady path for FED’s rate increase into the future which will never really materialize [in a substantial way] but caused unorganized flight of speculative capital from EM to DM including EU and Japan forcing treasuries in Japan into zero or negative rates in EU.

What we are facing in last ten years is continuing bailout of the financial oligarchy while secular economic decline continues from collapse to collapse.

Quixote2's picture

What was not mentioned is the new way of shoppping.  Instead of driving out to look for some $5-10 item, visiting 4 stores and not finding what you wanted, you discover Amazon.  Five minutes you get what you wanted, delivered in 2-4 days to your doorstep.  Multiple repetitiions of this experiment educated me to go to the computer before going outside to waste one hour and burn a gallon of gas with saving money in the purchase price.  Retired wife and I have two vehicles and average one fillup per every other month, one per month for both rigs.  Less than 2,000 miles per year per vehicle.  Most milage is to the grocery store or to the doctor/dentist.  The kids live less than a mile away.  As soon as the streets are populated with self-driving Uber (or equivalent) We are getting rid of the too expensive self owned vehicles.

izzee's picture

Before HiSpeed Internet, I needed to get in my car every morning and commute to an office 25m away = 50m/day= 250m/wk = 12,550m/yr --- 2 weeks off for a vacation---another 1000 - 5000m depending on if I drove to see the USA.

I quit the Company Job and went freelance. So more driving to different places...40 - 50m one way.

Near the end I was sitting in my car 3 hrs a day = so my 8 hr job was actually 11 hrs so Minus to what seemed to be Good Paying Gig. Sitting and Breathing Fumes 3 hrs per day didn't seem like a good avenue to a long life. So I reconfig'd and thanks to the Internet, I now "have to go someplace for work" not that often and never during "rush hours"

I now drive 5000m/yr and can drive an older model that I can actually work on myself and that dosen't eat insurance payments because I don't need it to run every day to get a paycheck. Actually I have two - one is 35 years old.

Sledge-hammer's picture
Sledge-hammer (not verified) Mar 4, 2017 11:04 PM

I am glad that I am not the only person who takes measures to reduce driving and save on the gas expense.  When gas was almost four dollars a gallon, I would buy only ten dollars of gas at a time and drove as little as possible.  I do not like the two dollar/gallon I pay now in Texas, but I take the plunge and fill my tank.  I do, though, drive as little as possilbe.  Hail Fellow ZHers.