2011 September 16

The Master Resource Report  2011-09-16

Household incomes and the cost of fuel. (page 1 )

Russia needs what price of oil to balance the budget? (page 2 )

A no growth industry. (page 2 )

Bike sharing plans. (page 3 )

Playing soccer in 110 degree temperatures. (page 4 )

Fuel demand is flat

This week the EIA reported that gasoline consumption for the week ending September 12 averaged 8.9 million barrels per day. This is below the year-to-date daily average of 9.0 million barrels per day but falls in line with the average for the week after Labor Day since 2004 which is 9.0 million barrels per day. The trend appears to be flat to slightly down.

The Ceridian-UCLA Pulse of Commerce Index (PCI) released this week also indicated that fuel consumption is stalling. “Based on the July and August data, the PCI will likely decline in the third quarter and suggests GDP growth of zero to 1.0 percent. While many may interpret this as evidence of an impending recession, we experienced similarly sluggish PCI and GDP growth in the aftermath of the 2001 recession, highlighted in the figure below with an ellipse. During that time, the economy didn’t really get moving until a wave of new home ownership rose. Best therefore to consider a slow-growth alternative to a recession — stumbling forward, waiting to get the energy to run again, but not falling down. This could go on for some time.”

Another indicator of a flat economy is the data on intermodal rail traffic from the Railfax Report. Compared to year ago levels it is up 0.6% after jumping nearly 19% from 2009 levels. Total rail traffic shows a similar 0.8% increase compared to 2010 for the four week rolling average which levels out the impact of short term events like weather.

As noted in last week’s report declining consumption of gasoline or diesel in the U.S. no longer guarantees lower prices since the surplus refinery production is now being exported to meet strong global demand. It is therefore unlikely that the U.S. economy is going to get any added boost from a decline in fuel cost.

For those looking for or counting on economic growth this is not good news. For those hoping to avoid another dramatic downturn the data above is probably good news. So is the glass half full or half empty? It probably depends on how you view life.

This week’s report takes a look at household incomes and energy prices over the last decade using just released U.S. Census Bureau data.