Early Signs of Recovery for American Energy and Economy
Posted June 9, 2020
As businesses reopen across the country, the U.S. economy is beginning to emerge from the widespread shutdowns caused by the ongoing coronavirus pandemic. America’s energy operators are poised to safely and responsibly power our economic recovery, and the latest market data shows that the initial phases are well underway.
While the short-term outlook remains unclear, energy analysts have consistently backed the strength of this industry’s fundamentals, and long-term forecasts signal demand growth for natural gas and oil through the next several decades.
Data from API’s April 2020 Monthly Statistical Report (MSR) reflected the weakest energy markets to date, but it’s worth noting that the industry’s flexibility enabled operators to adjust production and refining activity to weather the historic demand shock. Regarding the current outlook, API Chief Economist Dean Foreman explained:
“Significant uncertainty remains over the state of oil markets in the weeks ahead, but the realignment of the supply and demand balance coupled with the gradual reopening of state economies leads us to be cautiously optimistic that the worst may be behind us.”
For example, U.S. transportation trends, including traffic and flight patterns, show rising petroleum product demand over the past few weeks, which is an early sign of broader economic progress. Data from the TomTom Traffic Congestion Index below indicates that, across major U.S. cities, weekly traffic congestion has increased steadily since mid-April, after plummeting in March. As motorists resume to their daily routines, we can expect gasoline demand to continue to climb.
Data from Apple Mobility Trends substantiates this gradual return to normal, with sustained increases in driving and transit since U.S. mobility bottomed out in April. The publicly available index below tracks the usage of Apple devices and mapping requests since January, and while driving has increased much more rapidly after the relaxing of stay-at-home orders, public transit is also beginning to recover.
Similarly, U.S. commercial flights have slowly picked back up, indicating an associated rise in jet fuel demand. Data from FlightRadar24 shows flights and passenger throughput steadily increasing between mid-April and early June as travel restrictions ease and airlines begin restoring additional routes.
Though these are somewhat limited economic indicators, API’s April MSR also shows that petroleum demand rebounded by 3 million barrels per day as of May 8th from its historic low point in mid-April.
The American energy industry, transportation sector and broader economy are far from realizing pre-coronavirus levels, but if China – the world’s second largest oil consumer, behind only the U.S. – offers any precedent, then we’re making real progress. Last month, oil demand in China returned to near-normal for the first time since its national lockdown, with energy markets recovering sooner than analysts expected.
While the impact of post-pandemic consumer behavior remains unclear, energy demand has stayed relatively resilient, and indicators suggest that crude oil markets are slowly but steadily improving. For example, at the height of business closures and travel restrictions, the world still required 70 million barrels of oil per day, and the U.S. Energy Information Administration expects that the largest declines in domestic crude oil consumption have already occurred and demand will rise over the next 18 months.
During the public health crisis, America’s natural gas and oil industry has demonstrated its commitment to health and safety and its resilience in the face of economic uncertainty. The industry remains flexible to the ever-changing circumstances and focused on a post-coronavirus recovery that helps consumers, strengthens energy operators and powers the U.S. economy.
About The Author
Sam Winstel is a writer for the American Petroleum Institute. He comes to API from Edelman, where he supported communications marketing strategies for clients across the firm’s energy and federal government practices. Originally from Dallas, Texas, Sam graduated from Davidson College in North Carolina, and he currently resides in Washington, D.C.
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