Record pump prices start to hit road fuel sales in key markets

UK gasoline sales have slipped 6% year on year over the last six weeks, according to official data, in the latest indicator that record high pump prices are hurting OECD transport fuel demand.

Average gasoline sales at sampled service stations in Great Britain dipped 6% on the year from May 1-June 12 after showing a marked growth slowdown in April, according to the the UK's Department for Business, Energy and Industrial Strategy. Diesel sales over the same periods, however, were little changed although diesel dominates in the heavy transport sector where demand is less elastic to pump prices.

Overall, Britain's sales of gasoline and diesel in the week to June 17 averaged 16,222 liters per fuel station, according to the latest data, 8.7% below the pre-lockdown average of 17,766 liters in early 2020.

Global fuel prices have soared to record highs on the back of Russia's war in Ukraine, low stocks and a lack of global refining capacity, triggering concerns over demand destruction for a key component of the refined crude barrel.

Average UK pump prices for unleaded petrol and diesel hit a record of GBP194.17 and GBP187.61/l on June 16, according to the RAC, with similar record fuel price highs seen at the pumps in the US and Europe. In Germany, toll collection data has already showed a 2.2% on the year fall in truck traffic in May, according to the IEA.

In the US, recent weekly data from the US Energy Information Administration (EIA), shows gasoline deliveries were lower in May at -2.7% while gasoil sales fell by 4.7%.

US weakness

As fuel prices soar and refiners reap the benefits of cracks spreads over $50/b for gasoline and diesel, the demand hit at the pumps has started to weaken global OECD oil demand forecasts this year. On June 15, the IEA cuts its OECD gasoline and diesel demand estimates for H2 2022 by 0.3% and 0.9%, respectively and said it expect OECD fuel usage to decline in 2023 y-o-y by 1.3% for gasoline and by 1.0% for diesel.

"Preliminary data point to an almost instant demand cutback in response to the price surge. A more adverse macroeconomic climate of rising interest rates, the prospect of slowing economic growth and recession fears are also weighing on demand," the IEA said.

The demand hit on US road fuel sales was also noted by Standard Chartered, as distillate demand in the world's biggest oil market moved into significant y-o-y declines.

The rolling three-month change in US distillate demand currently stands at a decline of just over 5%, according to Standard Chartered analysis, only the fifth time a 5% fall has been registered since 2005.

"The current weakness is perhaps not necessarily a sell signal in itself, and the remaining data for June might improve," Standard Chartered's Paul Horsnell said in a June 17 note. "However, given that previous declines of 5% or more in diesel demand have not been followed by sharp sustained price increases, the current weakness is at least an amber signal.

Platts Analytics currently estimates that global gasoline demand will still grow by 1.75% to average 24.28 million b/d this year with diesel and gasoil demand rising by 1.79% to 27.85 million b/d.