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Gasoline and Natural Gas: Record Demand Growth Facing Record Supply Growth

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Last month, I pointed out that U.S. gasoline demand for the first half of 2016 was the highest on record. That trend continued in July.

The U.S. Energy Information Administration keeps records on gasoline consumption dating back to 1945, when Americans consumed less than 2 million barrels per day (bpd). Demand grew pretty steadily until the Arab members of the Organization of Petroleum Exporting Countries (OPEC) imposed an embargo against the U.S. and some of our allies in 1973. By that time, average gasoline consumption had reached 7.3 million bpd, but then demand stopped growing for a couple of years amid higher prices and government measures to curb U.S. oil demand.

While this indeed slowed demand growth for gasoline, by 1978 consumption reached 7.9 million bpd. But that proved to be the peak for the next 16 years, as the Iranian revolution in 1979 and the ensuing Iran-Iraq war propelled gasoline prices to new records. Those high prices, along with the response from measures enacted following the 1973 oil embargo, sent gasoline demand into a tailspin.

A growing population and years of low gasoline prices ultimately reversed that trend, and in 1995 gasoline demand exceeded 8 million bpd for the first time. In 2001 it breached 9 million bpd, and by 2006 it exceeded 9.6 million bpd. But once...


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