Nearly 42 million Americans will make road trips of 50 miles or more to celebrate Thanksgiving this year, an increase of 0.7% from last year, AAA says. And more of them will be driving bigger, less fuel-efficient vehicles and pumping premium gasoline.
This underscores one of the most surprising trends in the oil markets this year – strong demand. Growth has been concentrated in gasoline consumption, not just in the United States, but globally, most notably in China and India.
When reviewing the data, a few things jump out:
- After lagging employment growth for nearly a decade, road trips in the U.S. are increasing nearly twice as fast as employment growth.
- Low gasoline prices have sparked an SUV buying frenzy – most remarkably in China, where SUV sales are up nearly 50% year over year, despite stagnant vehicle sales overall.
- Consumers are buying less fuel-efficient cars – a notable break from a decade-long trend of incremental efficiency gains.
- U.S. consumers are buying more premium gasoline, recycling some of the savings from lower prices at the pump. Demand for premium gasoline is up 13% year to date, compared with just 3% for regular.
This leads us to a few investment conclusions:
- Low prices are working to help restore oil balances, albeit slowly.
- Commodities with greater leverage to consumers and services should outperform those with greater leverage to the industrial cycle.
- Consumer fuel demand (both gasoline and jet) suggests the consumer in aggregate appears to be doing all right, despite overall economic malaise globally.
To which we say: Happy Thanksgiving.