Bank of America Merrill Lynch has predicted the end of US gasoline. It says that the elemental problem with US gasoline remains the same. In spite of a small rebound in consumption in 2013, stocks remain ample and demand is facing a “big structural decline” in the years ahead.The bank estimates that even as US gasoline supply would continue to climb further, demand may fall cumulatively by 0.7 mn b/d. Alternative modes of transport like electric and nat gas vehicles would slowly begin to rule the road.

“We estimate the impact on gasoline demand will amount to less than 40 thousand b/d by 2018. This means the bulk of US gasoline demand destruction could come after 2020, firmly entrenching the world’s largest transportation fuel market on a permanent decline path for the next two decades,” the report noted.

The US vehicle fleet meanwhile shrunk from 2008 even as sales dropped sharply, thanks to global recession. The sales picked up and reached the 2008 levels only in 2012. Since the US vehicle markets are mature, they are saturated (0.8 vehicles per capita). Now, the vehicle markets would grow only in line with population growth.

“We expect vehicles per capita to stagnate and remain at these levels over the medium term, limiting any upside to oil consumption,” BofAML said.

But one should also note that even if the sales do pick up in view of replacement demand, it would spark a trend wherein efficient cars would run through the roads. “Therefore the average fuel efficiency of the fleet is expected to increase as the replacement rate picks up and older vehicles are replaced with newer and more efficient ones,” the bank said.

It believes that whichever way this strides in fuel efficiency may occur—either through technological advancements or through behaviour change in US populace demanding smaller or less powerful cars—those elements coupled with regulated fuel efficiency mandates and high fuel prices would prove to be negative for oil demand.

With the advent of alternative vehicles like Natural Gas Vehicles (NGVs) and Electric Vehicles (EVs) the verdict would be complete in itself, the bank report concludes.

Now, perhaps as a precursor to this, in a separate development, US business and labour leaders urged the US Congress on Wednesday to raise the gasoline tax, so that Highway Trust Fund—a fund that pays for projects in roads and bridges—would not turn dry.

"These investments not only crea te jobs but spur economic growth, ensure our country's long-term economic global com-petitiveness and improve the quality of life of our citizens," said AFL-CIO President Richard Trumka, who heads the largest U.S. labor organization.
Source: Bank of America Merrill Lynch