LONDON — Drivers around the world are tolerating record high prices for road fuels, as mobility trumps other expenses in tight household budgets for now, the data shows.
The high prices have not yet crossed the pain threshold for drivers in the main centers of demand. But that could change once U.S. drivers are charged more than $6 a gallon and crude oil prices rise above $140 a barrel, which could happen by the end of the year, analysts said.
Consumers have changed their driving habits, with some, for example, choosing not to fill their tanks to full capacity, but that has yet to reduce overall fuel demand, the data shows.
Drivers in the European Union rarely paid more than €1.60 a liter to fill up diesel and petrol cars, and mostly paid well below $1.50, according to Commission data. European dating from 2005.
But since Russia’s invasion of Ukraine in late February, diesel and petrol prices in the EU have soared above $2 a liter more than once, petrol prices being firmly held at this level.
So far, European drivers don’t seem discouraged.
Traffic in Rome and London last week easily eclipsed pre-coronavirus lockdown levels at the same time of year, while Parisian drivers hit the road in similar numbers to 2019, congestion data showed from the TomTom navigation data group.
Traffic congestion in Madrid has increased in recent weeks, but remains below 2019 congestion levels, much like in Berlin, according to TomTom data.
On June 8, petrol prices at UK pumps hit a record high of 1.8073 pounds ($2.19) a litre, while diesel hit its own record high of 1.8657 pounds, according to the automotive organization RAC Foundation.
Adjusted for inflation, this will likely be the highest price since the House of Commons Library’s published records began over 100 years ago.
A spokesperson for the German petrol station association TIV said that although prices are rising, demand for fuel is holding up.
But he said some driving behaviors are changing. “[People] fills up a little less then stops filling up at €30 ($31.34) or €40 and sometimes forms more carpools.
$6 a gallon?
In the United States, gasoline averaged more than $5 a gallon for the first time on Saturday, according to AAA data.
Data from TomTom showed US drivers in New York and Los Angeles were holding back on trips compared to 2019. But Patrick DeHaan, an analyst at GasBuddy.com, which tracks US retail fuel prices, said that he had not yet seen demand destruction.
Asked about the price threshold that would induce a drop in consumption, DeHaan said: “I think it would be $5.50, but definitely $6 [a gallon]», compared to around $5 currently.
Independent analyst Paul Sankey has estimated that the point at which U.S. gasoline demand declines is $6/gallon based on consumer behavior in 2008, when crude oil prices last reached a major peak.
In Asia, traffic in Tokyo, Jakarta and New Delhi is currently above pre-pandemic levels, according to TomTom data.
Chinese retail gasoline and diesel prices are currently at record highs. The tyrannical containment measures in major metropolitan areas in recent months have significantly weighed on oil demand.
In Japan, generous subsidies have kept current prices below the peak reached in 2008.
Indian petrol and diesel prices cooled after the government extended subsidies late last month. Still, prices are only slightly below the record highs seen in May.
Fuel consumption, however, jumped 23.8% in May from a year earlier to 18.27 million tonnes, according to Indian government data.
Analysts say crude oil prices still have a long way to go before significant demand destruction kicks in to balance the market.
“A slowdown in consumption and substitution remains in its early stages… Pain thresholds will start to set in as we enter the summer period,” said Ehsan Khuman, analyst at MUFG bank.
While benchmark crude oil prices are above $120 a barrel, they are about $20 below the level at which Khuman expects price-induced demand destruction.
The CEO of global commodities trader Trafigura said this month that oil prices could soon hit $150 a barrel and rise this year.
The Epoch Times contributed to this report.