The national average gas price topped five dollars a gallon, an all-time high, but is gas demand falling because of prices and what might that mean for ethanol demand?

David Widmar is an economist at Agricultural Economic Insights. He says gas consumption is plummeting when looking at data going back to March.

“We are below pre-pandemic normal. So when you consider 2015 to 2019 as a normal range, we’re managing about 91% of those levels. And so, we’re going to start having another conversation here about gasoline use, gas mileage, and all the implications that will have on the broader US economy, but also the agricultural economy.

The agricultural economy depends to some extent on biofuels, so the decline in gasoline demand is not a good sign for the renewable fuel mix.

“We have to start questioning this relationship between renewable fuels and energy, and so we have a slowdown in the broader economy through less driving, less economic activity, is going to start converting into how many gallons of renewable fuel can we physically mix. Ethanol can be a competitive alternative, but we still have this blending problem, and it will all depend on how many gallons of gasoline we use in the economy and how much we can blend. And in general, a lower amount of gasoline uses less ethanol for a potential blend. »

The longer high gas prices drive demand down, the more agriculture will watch what this means for corn demand.

“The longer this persists, the more changes we can expect in human behavior, the more worthwhile it may be to buy a more fuel-efficient vehicle or, perhaps, even consider changing the way your daily routines are, so those behaviors start to become more attractive, more desirable. And then the last thing for me, I think, that we have to wrestle with for the next three to six months is how has that been does it ultimately impact the use of corn or maybe even the use of soybean oil as we start to think about an economy that might just use less oil given the high prices?

Widmar says the global economy, as well as the agricultural economy, is at a tipping point.

“We kind of got to this $5 value, and if we start to see it backwards, the economic impacts in general in the US economy, but also maybe the impacts on total gas mileage and renewable energy consumed from agricultural products, are going to have an impact, but it may only be a temporary impact If these high energy prices continue and continue, yes, I think we have to start by recalibrating and readjust our assumptions. But these disruptions may take time to unwind, and that’s going to create more uncertainty. I think that’s the key here. It’s going to create more uncertainty for agricultural markets going forward .

The Widmar website at Agricultural Economic Insights is aei.ag.