economic recovery indicators -- how important is jet fuel demand ?
Another thought occurred to me -- if diesel fuel demand tell us interesting things about the domestic economy, should we consider jet fuel demand as a similar economic indicator. Diesel fuel demand, after all, represents only the hard goods component of the U.S. economy. The U.S. economy is now substantially driven by services and other soft goods elements. Jet fuel demand trends reflect both business and leisure travel and both forms of travel reflect real world trends in the soft components of the U.S. economy. As is true with diesel fuel demand, we can track trends in jet fuel demand in almost real time with little concern for the constant revisions that occur in federal government statistics on financial measurements of total GDP.
What did historic trends in jet fuel demand tell us ? First, jet fuel demand trends showed signs of softening as early as the second half of 2005. Demand dropped four consecutive months (Aug through Nov) in 2005 vs. 2004. In 2006, demand was lower vs. 2005 for three of four quarters and was 0.4% lower for the year overall. Demand in 2007 was nearly flat -- but as was true with diesel fuel demand, demand was significantly lower in 2008 in every single month and the year-to-year decline in demand averaged 5.7% in Q3 2008 and 12.5% in Q4 2008. Demand continued to decline at 10-12% on a year over year basis for the first half of 2009 but the rate of decline slowed to only 5% in Q3 2009 and 4% in Q4 2009. Jet fuel demand did not show any sustained recovery until early in 2010. In Q2 2010, demand was 3.8% higher than in 2009 but remained 185 thousand-bpd or 11% lower than in 2007. The sluggish recovery in jet fuel demand tends to confirm other indications that economic recovery is weak and sluggish.
We routinely address these and other issues of importance to producers, midstream companies and petrochemical companies in NGL Markets in North America.
