Motorists hit the road despite steep gas price

Reuters News
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Posted: Apr 19, 2011 3:41 PM
Motorists hit the road despite steep gas price

NEW YORK (Reuters) - U.S. gasoline sales rose last week as warmer weather enticed more motorists onto the road, but demand lagged year-ago levels as prices increased to over $3.80 a gallon, MasterCard data showed on Tuesday.

Retail gasoline sales climbed 3.3 percent from the previous week and drivers pumped the largest weekly volume since the start of this year, the credit-card company said in a regular report.

Demand, however, fell 1.6 percent from a year earlier.

The weekly rise was highest in the Midwest, Central Atlantic and Northeast regions where temperatures rose on account of spring weather, the report said.

"Historically, we see a rise in demand in the weeks before Easter, which last year was at the beginning of April," said John Gamel, director of economic analysis for MasterCard Advisors SpendingPulse, which uses purchase data to determine national demand.

However, Gamel said, retail prices are rising steeply and approaching cut-off levels after which any additional cents to the gallon could result in significant demand destruction.

"We saw sharp demand declines around $3.50 a gallon before. But because the economy is improving ever so slightly now and because consumers have already experienced those higher levels before, the threshold at which point demand will drop is higher this year. We expect that around $4 a gallon," Gamel said.

A gallon of gasoline sold for $3.81 on average last week in the world's biggest oil-consuming country, up 9.00 cents week-on-week and 33.7 percent higher than a year ago, according to MasterCard. It marked the first time prices were higher than $3.80 since September 2008.

The U.S. Energy Information Administration (EIA) came out with a slightly higher figure on Monday, when it put national average gasoline prices at $3.84 a gallon and indicated demand rose last week versus a week before.

About 9.181 million barrels per day of finished motor gasoline were supplied to the market, up 328,000 bpd from the previous week, according to EIA data.

Such seasonal aberrations do not trump a larger trend of falling demand. The four-week average demand in MasterCard's data, for example, fell 2.1 percent from year-ago levels.

(Graphic on four-week average: http://link.reuters.com/dah62k)

For now, demand is slowing at weekends as customers cut discretionary driving.

"People still have to drive their kids to school, they have to go to work but we're seeing cutbacks primarily in shopping trips and as people decide not to take that weekend trip," Gamel said.

MasterCard Advisors, a unit of MasterCard Inc, estimates retail gasoline demand based on aggregate sales in the MasterCard payments system coupled with estimates for other payment forms including cash and checks.

(Reporting by Selam Gebrekidan; Editing by Dale Hudson)