Gasoline and Diesel Demand Drops, Survey Shows

With fewer people on the road, retailers have seen demand for fuel drop, according to data released today by NATSO, a trade group representing the travel plaza industry.

Ask any economist what happens when a product's supply is ample but demand is lower, and you'll hear that the price of that product is likely to fall.

Not so with gasoline and diesel fuel this year, based on demand data released today by NATSO, the national association representing America's travel plazas and truckstops. Demand for both gasoline and diesel dropped significantly in May, even while wholesale fuel prices (the cost of fuel that retailers pay) continued to climb.

The number of gallons of gasoline sold fell nearly three percent in May as compared with last May 2007, and diesel gallons sold dropped twice as much that month, by about six percent. Declines of demand for fuel greater than 2.5 percent are rare, even more so in a time that is considered to be peak driving season.

Despite these declines, during that same month gasoline and diesel wholesale prices surged. According to the Oil Price Information Service (OPIS), the average wholesale cost of fuel sold to retailers climbed throughout May and June. Retailers were paying an average 37 cents over the prior month for gasoline and an average of over 60 cents more for diesel, topping the $4 mark for the first time ever.

Softer demand and higher prices lends further support to experts who have pointed to unregulated market speculation as a significant culprit in higher fuel prices.

"In the past, when we've seen skyrocketing fuel prices like this, it is because of some crisis that squeezes supply," said president and CEO of NATSO Lisa Mullings. "We've seen no long lines at the pump; in fact, demand has fallen and supply is adequate, so it is clear that there is another factor driving up prices."

The price of crude oil on the commodities markets has surged this year, up 40 percent over the past six months. Where once these markets served as a management tool for oil producers and oil consumers such as refiners and airlines, the markets have attracted a new breed of speculator-non-commercial traders, such as Wall Street investment firms, pension funds, and others who have no involvement with the commodities they are buying and selling and who never intend to take delivery of a barrel of oil. These non-commercial speculators, called "paper traders," now account for two-thirds of all crude oil trading, double the number active in the markets since the year 2000.

A number of congressional hearings have focused on the role of speculators in soaring fuel prices, and a number of legislative proposals are under consideration to limit the role of speculators in the market and increase the regulatory authority of the Commodities Futures Trading Commission.

While consumers feel the squeeze of the higher prices, for fuel retailers the surging price of fuel strains their credit lines and makes cash flow difficult to manage. A tanker truckload of diesel fuel, which a couple of years ago cost a little more than $10,000, now costs more than $32,000. Wholesale prices can increase as much as 10 to 15 cents in a single day, making it more challenging than ever to manage fuel inventories at travel plazas and gas stations.

NATSO is the professional association of America's $42 billion travel plaza and truckstop industry. Founded in 1960, NATSO represents the industry on legislative and regulatory matters; serves as the official source of information on the diverse travel plaza and truckstop industry; provides education to its members; conducts an annual convention and trade show; and supports efforts to generally improve the business climate in which its members operate.

SOURCE NATSO

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Copyright © 2008, NewsBlaze, Daily News

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