Don’t Fall for Reported Gasoline Demand Surge

The U.S. Energy Information Administration’s (EIA) often-cited demand proxy, product supplied, is a useful indicator — but due to its methodology, is also prone to sending misleading signals. Weekly U.S. Product Supplied for gasoline jumped 531,000 barrels per day (bpd) in the week ending August 21 from the prior week to average nearly 9.2 million bpd. This was the highest since the week ending March 13 — just before the pandemic quarantines began.

While some heralded this as a sign of actual end-user gasoline demand normalizing, this is not the conclusion that should be drawn from the data. The EIA measures product inventories not at the retail level, but at the primary supply chain or wholesale level. As such, the EIA’s Product Supplied figure is prone to overstating actual demand in periods of a strategic shifting in inventories, from the primary supply chain to the retail level.

One of the key times this phenomenon presents itself in the data is ahead of hurricanes. This can be seen in EIA Weekly Product Supplied data looking back to 2019’s Hurricane Barry and 2017’s Hurricane Harvey. The big draw in gasoline inventories last week was driven primarily by PADD1C, as news of two hurricanes hitting the Gulf Coast prompted retailers to boost inventories ahead of potential supply disruptions. Gasoline demand, as reported by this proxy measure, should move lower in the coming report week.