After years of tax incentives in Eurpe and increased demand in emerging economies, diesel (gasoil) has emerged as the king among fuels dethroning petrol (gasoline), according to a report from Bank of America-Merill Lynch (BofAML).Gasoline was once a king among petroleum products in the 1980's and 1990's. Across the barrel, gasoline consumption was larger than that of any other fuel. As a result, the US driving season had an outsized influence on global oi pricing dynamics, BofAML notes.

The US dependence on foreign fuels have declined with the increased production of natural gas and crude oil cheaply.

Coupled with a structural decline in demand, this increased gasoline output has now pushed America into a net exporter position. Most importantly, as light duty vehicle sales continue to grow, two dynamics will continue to play out. On the one hand, increased cars per capita in EMs will continue making global gasoline demand growth an Emerging Asia story. On the other hand, high replacement ratios and more fuel efficient vehicles will further push gasoline demand lower in DMs.

While prices for gasoline have spiked in recent months, US exports to Latin America have continued unabated. Mexico has been the primary recipient of US gasoline for years now, but the saturation of the North American market has pushed US refiners to start sending more gasoline to other countries in the region like Brazil or even Colombia. Outside Latin America, the biggest recipient of US gasoline exports has been Canada, but even African appetite for US-made gasoline has increased rapidly during the last year or so.

US refiners are forced to look at new markets in view of the falling consumption of gasoline at home.
Despite the modest uplift experienced last year, gasoline demand is on a deep structural decline. "We highlighted this trend in The end of gasoline back in
February, and still believe that rapid gains in CAFE-related fuel efficiency gains will erode domestic consumption in the US for years to come. Even worse, as these efficiency fuel gains give way to electric, hybrid and natural gas vehicles, the ongoing demand decline could speed up. Of course, many of these factors are unlikely to fully materialize before 2020. But over the next 15 years it is hard to think of a scenario in which US demand for gasoline will not continue to decline structurally," BofAML said.
Source: Bank of America-Merill Lynch (BofAML)