Weekly Petroleum Supply Team on Possibility of Recession

This is a great post from Mish Shedlock who received a very intuitive email from James Beck, Lead Analyst, Weekly Petroleum Supply Team for the Energy Information Administration.  As Mish points out, it is very rare that someone from the inside steps forward with this type of detailed analysis and identifies themselves.

With that said the piece of Beck's email that stood out to me is as follows,

• The data support your general point that total petroleum product demand is at 1997/98 levels. The running three-month average that I am using (Apr/May/Jun--the last three months available) show that total demand has bounced above the lowest point for the same three-month period in 2009, but remains significantly below 2010 and 2011 levels--remaining very near 1997/98 levels.  This 15 years of demand destruction cannot be explained fully by increased efficiency or increased use of biofuels and renewables (these have, at most, a marginal effect). This is truly an indication of the real and continuing trouble in our economy, high unemployment and underemployment, loss of manufacturing, and reduction of shipping. Total product supplied for April - June has averaged 18.652 million barrels per day, 0.5% above the same period in 2009, and is the second-lowest level for the three-month period since 1997 (which was at 18.487 million barrels per day).

So with demand down why are gas prices up?  Part of it has to do with refinery issues whether it is production issues or capacity being taken off line.  Global politics are playing a role as well with constant saber rattling in the Middle East.

As much as pundants claim that Americans are used to $4 gas and have adjusted to it, I say that is garbage.  Tell that to the person who is out of work, the person who is trying to support a family, or the person who just took a job at a reduced salary.

Higher gas costs are a tax on the economy.  That usually means less savings and spending on other goods and services meaning less economic growth.