It may not seem like a whole lot, but U.S. Gasoline Use Fell 4% Last Week:
Americans used 4% less gasoline amid skyrocketing pump prices last week than they did the week before Hurricane Katrina hit, the federal government reported. But whether that indicates consumers have decided to conserve or merely that they couldn't find all the gasoline they wanted isn't clear.
The figures came amid signs that Katrina's effect on the nation's energy markets will continue to be felt in the weeks and months to come. The Department of Energy's Energy Information Administration said yesterday that stores of gasoline last week fell below the average range for the period, in a time when refineries are running flat-out to meet demand, after the hurricane knocked out Gulf Coast refineries. Meanwhile, the U.S. Coast Guard said yesterday that 52 energy-production platforms in the Gulf of Mexico were missing and 58 were damaged by the hurricane, nearly double the report of missing or damaged platforms Tuesday.
Following weeks in which U.S. gasoline use stood at more than 9.4 million barrels a day, it fell to about nine million barrels in the week ended last Friday, the EIA reported. Use fell by a similar amount compared with the year-earlier period. However, EIA officials cautioned that one week doesn't make a long-term trend.
The figures didn't include data from the Labor Day weekend or from this week. It's also unclear whether the weather simply reduced driving in the affected states, though government analysts doubted that explained the full drop. Tom Kloza, chief oil analyst with the Oil Price Information Service, a Wall, N.J., industry-research firm, said fuel retailers he has talked to have reported a particularly large drop-off in demand since Saturday. "It dropped off the table," he said -- a shift that, if true, wouldn't be reflected until the next government report, due out next week.
This seems to go well with the chart we posted yesterday, in which some service stations reported that carpooling was biting into their sales. It also highlights a couple of important points. We can reduce gas use without reducing economic activity. The reason for this is that not all gas usage is equally worthwhile. Driving to a friend's house to visit isn't as productive as driving to work. Carpooling, doesn't reduce the number of people getting to work. In other words, there is a lot of gas usage whose marginal value added to the economy is virtually nil, and consumers are sensitive enough to drop those things first. Were we to have shortages, it would seem that we could keep roughly the same level of economic activity and standard of living. This runs counter to an idea that's been proposed by physicists that as long as Oil is a key ingredient in the economy, no matter how small, that a percentage drop in supply will cause the same percentage economic contraction. Obviously this is incorrect. If energy habits mark a major shift, prices may fall rapidly from their current perch.
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