It's not easy for any sort of economist or think tank to produce a number that everyone looks at as significant. But it's clear that MasterCard's Spending Pulse information on gasoline consumption has risen to that level.
Slowly but surely, the weekly MasterCard estimate of US gasoline consumption, which uses credit card swipes as the starting point for calculating the final number, has taken hold. It may have hit its most recent high point Tuesday morning when an analyst cited it in posing a question to the group of executives on the quarterly earnings conference call of Valero.
Spending Pulse takes data from the use MasterCard credit card purchases of gasoline, and adjusts for other factors, such as the fact that MasterCard only has a certain share of the market. In theory, this makes a lot of sense. Point-of-sale data is widely used, and that's what the MasterCard data is.
In a meeting last year with Platts, MasterCard officials did concede that the week-to-week comparisons could show significant volatility, affected by such little things as when a holiday fell one year to the other. But the moving four-week average was touted as smoothing out those variations. Soon after meeting with the MasterCard officials, we discussed the MasterCard numbers with a regular provider of key oil market data -- we'll keep its name undisclosed -- and officials with that provider said the MasterCard data was lining up with the group's own numbers.
The survey has gained traction among analysts and decent reliability as a prognosticator of weekly Energy Information Administration figures, despite an admittedly high margin of error of 4.1%. Given the speed at which October gasoline prices are falling, the week-to-week numbers are generating suspense as the first that may provide tell-tale signs whether a demand comeback is around the corner. Three times marks a trend, MasterCard Advisors has said.
Platts began writing about the MasterCard numbers as soon as they were first released last year. I will concede that I was little concerned about that at first, simply because of the newness of it all. But the basic idea that a credit card swipe provides reams of data was easy to accept. And now, much of the rest of the market has accepted that data as well.
Looking at the most recent weekly report, the total drop in demand is truly stunning. The data shows US gasoline consumption at more than 9.7 million b/d at the end of 2007, declining to 9.56 million b/d last July, when prices peaked, and slumping to almost 8.9 million b/d for the week ended October 24. That actually is not the low amount recorded by MasterCard; a figure of 8.625 million b/d was reported for the week ended October 3, but that was also when much of the Southeast and Midwest was still struggling to get supply lines back following Hurricane Ike, which curtailed demand.
What's notable is that gasoline consumption has not spiked higher even as the price has plummeted to a national average solidly less than $3/gal. This is a task for a smart economist, to compare the impact on demand of lower gasoline prices against the impact on demand from a poor economy. Clearly, based on MasterCard's data, the latter is trumping the former. MasterCard officials have said that $3.10 is a "threshold" price. Below that, gasoline demand will tick up, based on past surveys. Above $3.10, demand wilts. That was the theory, and maybe it will prove true in the long run. But it isn't showing that now.
Leave a comment