Pull over, California. The driving capital of the world is … Texas?
Texas may not have more cars than California. Or more people driving those cars. But in terms of gasoline consumption, Big Oil beat Hollywood for the second straight month in January, and is trending toward an annual win for the first time since 1986 — when “Dallas” was a top-rated TV show.
Recent data from the Energy Information Agency showed prime supplier sales of motor gasoline at 38.306 million gallons a day in Texas for January, the latest month. It was 11.2% of total US gasoline demand for January. California had 37.225 million gallons per day, falling 1.081 million gallons per day short and representing 10.9% of US sales.
“I’m not surprised. You have a bunch of people driving electric cars around here,” a California oil products broker said. “Seriously, there’s a Tesla around every corner. There’s a Prius is every driveway. … In Texas, I think the No. 1 vehicle is still a truck.”
David Hackett, president of energy consulting firm Stillwater Associates, echoed the idea that the consumption change says something about vehicle efficiency. But there’s “more than Prius vs. pickup” behind the switch, including gasoline prices, urban density, Uber and even the weather. “I think everybody in Texas has an F150, or two or three of them. But I see a lot of them in California, too.”
The EIA data measures primary petroleum product deliveries into the states where they are locally marketed and consumed. It’s considered about as good a measure of local demand as possible.
The two states jockeyed for the title in the ‘80s, boom years for oil-rich Texas, which in 1986 posted average gasoline demand of 35.98 million gallons/day, or 647,000 more than California. June 1988 — about the time of the oil bust — was the last month Texas topped the chart until October 2014. It next happened in 2016 in four months, but by no more than 434,000 in June and barely 26,000 in December. In the meantime, California dominated, by a record 12 million gallons/day more in February 1993, and sometimes posting a lead over the 10 million mark as late as 2006.
California’s demand advantage has been dropping since the recession, despite a population advantage of nearly 39 million people compared with Texas’ 27 million. There’s also a vehicle advantage. In 2015, there were around 263.6 million vehicles from cars and trucks to motorcycles registered in the US, according to Statista, a statistics company.
Of the automobiles, 14.46 million were in California, followed far behind by Texas with 8.45 million and Florida with 7.74 million. Only 250,000 of California’s cars were electric vehicles, led by Tesla sales. But that’s risen even as gas prices have plunged. And California’s EV fleet is said to be more than three times as much as all other states combined, providing a window into the state’s thirst for more fuel-efficient cars. For more evidence, California’s Board of Equalization, which tracks sales tax on gasoline, showed net taxable gasoline gallons at 15.46 trillion gallons in fiscal year 2008, then dropping below 15 trillion until fiscal year 2016 at 15.3 trillion gallons.
“The Texas demand line is more or less straight line growth since 1993,” Hackett noted. “It’s more steady growth while California has taken a hit with the recession and only recently recovered.”
He and others pointed to several reasons that Texas has caught up to California and may continue to overtake it on the demand side, besides a fuel efficient focus.
Higher gasoline prices
“The price of gasoline here, it’s $3 to $3.25/gal,” the California broker said. “And in Texas, it’s probably $2.50 or something like that. We’re talking two different planets.”
AAA showed the national average on March 28 at $2.283/gal at the pump for regular gasoline. For Texas, it was $2.108/gal. For California, it was $2.977/gal. That’s the end of the gasoline supply chain that starts on the spot market, where 25,000-barrel clips get traded out of refineries, storage or elsewhere.
S&P Global Platts assessed spot Los Angeles CARBOB pipeline gasoline at $1.713/gal on March 28 and Gulf Coast pipeline CBOB at $1.516/gal — only 20 cents apart. But add in things like logistics, profit, taxes and regulatory costs and California retail prices soar. California is also a historically more volatile spot market. But Hackett noted that a slumping oil complex has cut everybody’s pump price nearly in half in recent years, including California.
While Texas has been steadily gaining ground with gas demand, the weather on the West Coast may have given Texas a final push toward the consumption crown. California ended a long drought with healthy rainfall statewide last year, including December and January. “On a short-term basis, gasoline demand especially in the winter depends on the amount of rainfall,” Hackett said. “It sounds silly, but it’s been true for a long time.”
Urban density and Uber
“California is a lot more urban,” said Hackett, who notes that rail, bus and ride-sharing programs like Uber and Lyft have grown in popularity in his Golden State. “You can’t afford to park a car, can’t afford to pay for it. So you take a Lyft everywhere. I think there’s a lot more of that going on here than in … wide-open Texas.” The broker, meanwhile, named off several people, including his kids and sister, who just jump in an Uber to get where they’re going – softening that stereotype of a car-crazed California.
“Texas is so big. And spread out. We’re dense, and we can’t spread out anymore,” the California broker said. “But there’s really no need to drive. Everything here is going vertical. You don’t have that problem in Houston. You keep building west or north or east.”