Released on August 21, 2002
(Next Release on August 28, 2002)

Planes, Trains and Automobiles
Whether it’s a family vacation or a short business trip, often one of the first decisions to be made is picking which mode of transportation to use. With gasoline demand very strong this spring and summer, while jet fuel demand remains down from previous year’s levels, there has been speculation that some people may be opting to drive on some of the trips that they had flown previously. Now there is data to support this supposition.

In their August 16-18 weekend edition, USA Today, had a lead article on this very subject. In this article, USA Today analyzed OAG (Official Airlines Guides) data provided by an aviation industry consulting company and found that while scheduled domestic seats on airplanes were down 8 percent in July compared to July 2001, declines were greater on shorter flights. Scheduled domestic seats on flights of less than 200 miles were down 15 percent in July versus year-ago levels, with flights with distances of between 200 and 399 miles down 12 percent. But flights greater than 400 miles in length were down only 5-6 percent. Combined with gasoline demand since Memorial Day averaging over 9 million barrels per day (an increase of 1.9 percent over last year during this same period), there does appear to be enough evidence to conclude that, indeed, some travelers are driving on trips which they may have flown in previous years. How much this is adding to gasoline demand is difficult to determine. But, for example, with Continental Airlines recent report that they intend to reduce the number of their flights in the future, it appears that this phenomenon could continue for quite some time. And unlike Steve Martin’s character in the movie by the above title, many travelers this coming fall and winter may not use multiple modes of transportation to get “home” for the holidays, but may solely rely on the automobile to make the trip.

Crude Stock Build Last Week Not Unusual
After U.S. commercial crude oil inventories fell by 7.2 million barrels in the week ending August 9, some traders and analysts were expecting a further drop in inventories last week. But when crude oil inventories instead rose by 2.8 million barrels, many expressed surprise. However, looking at historical data, it should not have been such a surprise. Since 1982, there have been more than 60 weeks in which U.S. commercial crude oil inventories decreased by at least 7 million barrels. Two-thirds of the time, crude oil inventories increased the following week. This pattern has been even more pronounced in recent years. Out of the last 7 times crude oil inventories have fallen by more than 7 million barrels in a week, 6 of the times, it has been followed by a week in which they increased. Thus, the fact that they increased last week is not unusual. What is important is that the trend of declining crude oil inventories, which has been taking place since the end of March, continues.

Retail Gasoline Prices Remain Stagnant
The U.S. average retail price for regular gasoline remained relatively flat, falling by just 0.1 cent per gallon last week, ending at 139.2 cents per gallon as of August 19. This price is 3.5 cents per gallon lower than last year, turning around four previous weeks of higher 2002 prices. Price changes were mixed throughout the country, with the largest decrease occurring in the Rocky Mountain region, which saw a decrease of 0.7 cent to end at 144.9 cents per gallon. The largest price increase occurred on the Gulf Coast, where prices rose 0.5 cent to end at 130.9 cents per gallon. Gasoline prices have not seen any sharp increases yet this summer, and while there is still potential for some pressure on prices ahead of Labor Day, any significant movement would likely prove to be very brief, barring major regional infrastructure difficulties. Retail diesel fuel prices increased by 3.0 cents per gallon to a national average of 133.3 cents per gallon as of August 19.

Next Propane Inventory Release
Propane inventory data for August 31, 2002, will be published in the September 11, 2002 issue of “This Week In Petroleum.”