In this year’s first quarter, demand for diesel fuel and other petroleum distillates was about 6 percent lower than a year earlier, the Financial Times reported.
Demand shrank because supply chains have largely untangled, bringing supply and demand closer to balance. Also, surging post-COVID demand for goods and travel is being satisfied, and the volume of ocean-borne freight has been slashed, the FT said.
“If you were looking at it…not knowing what the wider economy was doing, you’d say we’re seeing some sort of industrial recession,” Tom Kloza, chief analyst at the Oil Price Information Service, said to the FT.
The global economic slowdown was reflected in the U.S.’s first-quarter growth of 1.1 percent, compared to 2.6 in the preceding quarter.
“Simply stated, we’re in a freight recession,” Shelley Simpson, CEO of J.B. Hunt Transport Services, said in comments quoted by the FT.
Carol Tomé, UPS’s chief executive, expects “volume to remain under pressure,” she said in a statement in which she also highlighted the drop in the volume of goods shoppers are buying.
That may soon translate to shrinking gasoline sales as consumers continue to pare back spending.
“If the business sector continues to retrench, that will inevitably eventually feed into the consumer side,” market analyst Rory Johnston at Commodity Context, told the FT.
Drivers bought 3 percent less gasoline during the week ending 22 April, year over year. That volume was 6 percent below that of two years previous and 20 percent less than the same week in 2019, the Oil Price Information Service noted.
“Leading indicators of future mobility are suggesting that [summer] travel is going to be softer than people think as consumers are pinching their wallets harder than people realize,” Michael Tran, managing director of global energy strategy at RBC Capital Markets, said in an FT interview.
RBC’s index of future travel, which tracks hotel reservations, rental car bookings, and other indicators, slipped into negative numbers in February and March, signaling a weak travel season ahead.
TRENDPOST: A weak summer travel season pushes the U.S. another step closer to recession. However, as we note in our Market Overview section, there are a lot of wild cards that, if played, will drive up energy prices.