🔍
QuickHit: Permanent demand destruction in fuels markets - YouTube
Channel: Complete Intelligence
[6]
Hi everyone this is Tony Nash with
Complete Intelligence.
[9]
Thanks for joining us for another
QuickHit. We're joined today
[13]
by Patrick De Haan with Gas Buddy.
Patrick, thanks so much for joining us.
[18]
Can you tell us a little bit about what GasBuddy does
[21]
and what you do there? Well thanks
for having me Tony. GasBuddy helps
[25]
motorists
save at the pump. We show motorists low
[28]
gas prices across North America
and down under in Australia. We even have
[33]
a payments card they can sign up for to
reduce their cost even further.
[37]
About me I've been with GasBuddy now
for over a decade basically helping our
[41]
millions of users
understand what goes into what they're
[45]
paying at the pump
and to understand how complex issues can
[49]
influence
their annual fuel bill and basically
[52]
write blogs
and tell motorists where gas prices are
[55]
headed to save them even more.
That's perfect and Patrick it's a great
[60]
product I follow you on twitter.
I'm always interested in what you
[64]
have to say
and it's weekly. It's in the
[67]
middle of the week and
there's a lot of information about
[70]
what's happening
kind of coming out of refineries as well.
[74]
So I'm
really interested to see what
[77]
hear what you have to say today.
So Patrick I was following you
[80]
particularly in the last couple of weeks
going into the U.S. Labor Day weekend in
[84]
early September and then coming out of
it.
[87]
It seemed to me that consumption
going into Labor Day seems pretty strong
[91]
but coming out of it seemed like
things really fell off even on an
[95]
annualized basis. Can you really talk us
through
[99]
what is that telling you if
anything meaningful
[104]
and is that telling you anything about
[107]
the recovery from COVID, the consumption
recovery?
[110]
Well at least so far you know we're kind
of just entering this post-summer time
[114]
of year.
That we really get a good idea of where
[117]
we're going and obviously like you said
COVID19 has really
[120]
influenced every angle of what's normal
for this time of year. What's normal is
[125]
that demand for gasoline typically drops
off notably.
[129]
Kids are back in school. Vacations are
done. Americans are staying closer to
[133]
home. But this year,
a lot of what we're seeing in the media
[136]
the current events
headlines are playing into how Americans
[139]
are feeling
and of course that plays into where they
[142]
go. How often they do
and so all of this is really factored in
[146]
and probably one of the top
economic indicators of what to expect.
[150]
And so far here
you know in the week after Labor Day.
[154]
We did see a nice run up to Labor Day. I
think
[157]
it was probably one of the best summer
holidays, which gave us some glimmer of
[161]
optimism.
But now kind of we're coming down from
[164]
the sugar crash and now
we are starting to see demand fall off.
[168]
And where we go from here I think
we're kind of at a turning point. Will we
[172]
see demand continue to kind
of plunge or will we start to see a
[178]
little bit more optimism? I think
obviously a vaccine would be the holy
[182]
grail.
But for now, really we're kind of looking
[185]
at seasonal trends that may be enhanced
by kind of a lot of the restrictions
[189]
motorists are contending with state by
state.
[192]
Okay, I notice next to my office is a
commuter lot.
[195]
Okay and that commuter lot has been
closed. We're outside of Houston. So,
[200]
people get on a bus to go into
downtown Houston for work. That's been
[203]
closed since February.
Yesterday, I noticed they're mowing
[207]
the lawn. They're getting it ready to
reopen these sorts of things.
[210]
How much of an impact are those
commuters,
[214]
who are driving, who would normally say
bus into a downtown?
[218]
Is that having an impact on the
consumption and on the demand
[222]
or is it pretty marginal at this point?
Well, you know at this
[226]
point you know we've seen a lot of
demand come back. We were
[229]
one at one point down 55 percent in March or April and basically everyone stayed home.
[234]
Now we have rebounded we're still down
about 15 to 20 percent
[238]
compared to last year but it's that last
15 percent
[242]
or so that's probably going to take more
than a year, maybe, two years
[246]
to fully come back as businesses slowly
reopen. So, I think that's a really good
[250]
benchmark of how quickly that last 15 percent in demand is
[255]
going to take and I think at this case
you know, it's going to take quite a
[259]
long time for people to be comfortable
getting on mass transit. I have the same
[262]
thing here
in Chicago. I was recently down in
[265]
Northwest Indiana. There's a lot of
commuters that come up from Indiana
[268]
during the day.
And again a massive parking lot
[271]
satellite imagery shows that parking lot
filled
[274]
for the last 10 years consistently,
suddenly it's empty.
[277]
So I don't think that you know, given
some of the big businesses they're not
[282]
really talking about getting a lot of
people back into the offices by the end
[285]
of the year.
I think all the focus really is going to
[288]
be on early next year
or if there's a major disruption like a
[292]
vaccine that would cause
businesses to move their timelines up.
[295]
But for now, I think when it comes to
gasoline, distillates
[299]
even jet fuel, it looks rather
bleak.
[302]
Yeah, I think so and I think we're
getting to that point of the year. Even
[305]
if there was a vaccine tomorrow.
I don't know if people would necessarily
[309]
call everyone back before the end of the
year. It just seems like
[312]
we're getting into a really awkward time
where it's hard to you know tell people
[316]
to come back. Is that the sense you get
as well? I mean JP Morgan aside, right?
[320]
You know, they've called everyone back
on September 21st but
[323]
do you see, are you seeing much activity
around
[326]
other people heading back into the office?
[367]
Not a whole lot you know. It's really
interesting actually. I was talking to
[370]
my wife this morning, who
does investment bacon and she said
[373]
that some of the JP Morgan traders had
been called back
[376]
earlier only to be now sent back home
because of a coronavirus
[380]
in the office and I think that's kind
of
[383]
the risk that businesses are taking here
and that's why I think it's going to
[386]
take a while for us
to get that confidence back to go in
[389]
offices and now even more so than ever,
businesses are becoming accustomed to
[394]
this new era
and telecommuting is likely to really
[398]
surge
and so that could mean a permanent
[400]
demand destruction of at least five
percent
[403]
maybe even more than that. Maybe we don't get ten percent of demand back
[407]
and it takes years for us to start
building up our confidence to get back
[410]
on planes, to get back on trains
and that's where kind of the dark clouds
[414]
are forming for petroleum
is that the longer we remain in this era,
[419]
the longer it's going to take us to get
that confidence back to go
[422]
back to some sort of sense of normal.
Right,
[425]
and so since you focus on gas prices,
petrol prices.
[429]
What does that do if we don't recover
that 10 percent
[433]
in say commuter consumption or driver
consumption?
[437]
You know, putting even the jet fuel stuff
aside. What does that do for
[441]
overall say gasoline pricing in the U.S.?
Are we at a kind of a step lower than
[449]
we've normally been
or do we still see say intermittent
[452]
seasonal volatility where we go up to
normal prices?
[455]
What does that look like for the average
consumer? Well Tony, I think it was back
[459]
in
2015 at some point when OPEC opened the
[463]
Spigot
up and oil prices were low. We all had
[466]
this phrase “it was lower for longer.”
Right. and I think that's a phrase that
[470]
may be you know kind of in a different
use here
[472]
but that's what we may be looking at for
both gasoline and distillate prices lower
[477]
for longer
because of this very slow return of
[481]
demand. And so I
foresee that gasoline prices will
[485]
struggle for
quite some time. Maybe, a period of years
[488]
to get kind of back
into where they normally would go and
[491]
it's because of this demand destruction
that could stick around.
[494]
I think most of this winter motorists
will be looking at prices under two
[498]
dollars a gallon.
Of course barring the traditional high
[501]
taxed, high-priced states like California
and Hawaii where the sun is shining
[506]
and unfortunately right now they have a
lot of forest fires but for everyone
[509]
else it's going to be a sub 2
gallon winter and next summer is
[513]
probably going to be another good one
but
[515]
you know the the future next summer
does get a little murky if we do get
[519]
some demand back.
Keep in mind that we're making a lot of
[523]
permanent decisions today on the era wherein that is oil production has been
[528]
shut down, drilling is offline, even some
refineries in Europe are shutting down.
[532]
And if we do get some sort of bounce,
that could lead these shutdowns today,
[536]
could lead to higher prices whenever we
do turn that corner.
[540]
Like I said, yeah, so just for context
when you say sub two dollars a gallon?
[545]
How much is that off of normal prices?
What are normal prices? Is it 2.53 dollars?
[551]
It typically is in the last few years
we've held remarkably stable somewhere
[555]
in the mid to upper two dollar gallon
range nationally. So,
[558]
very, very rarely with the exception
of I believe early 2016 and early 2015
[564]
have we seen the national average
spend a considerable amount of time
[567]
under two dollars. So you're saying 30%
off of what had been traditionally
[572]
normal prices? Is that
fair to say for the next maybe
[576]
12 months or something?
Yeah, I think six to 12 months and
[579]
potentially beyond that and the amazing
thing about those prices is before this
[583]
that would entice motors to hit the road.
Now, it's not really doing a whole lot.
[588]
Interesting.
Okay, so Patrick we got to end this on a
[591]
high note on a positive note so what's
the upside
[594]
if gasoline prices are 30% off of
normal
[598]
but commuting is down these sorts of
things.
[601]
Is there an upside? What are you
telling your clients
[604]
about this? Well, you know,
the upside here potentially and my
[609]
clients at GasBuddy members so we're
looking at this a little bit differently.
[613]
Is that low prices are probably here to
stick around?
[616]
and I think given the situation, low
prices will actually keep America using
[621]
more petroleum than you think of you
know the early era 2014,
[625]
2013. When motorists were really looking
at Prius's, EVs.
[629]
I think that's going to really slow down
given the environment of low prices
[634]
kind of incentivizing motorists not to
ditch
[636]
their fossil fuel cars at this point.
Interesting.
[640]
Patrick, thanks so much for your time. I
really appreciate it has been super
[643]
insightful.
Thanks again and I hope you can come
[646]
back. Thanks for having me Tony.
Most Recent Videos:
You can go back to the homepage right here: Homepage