09/17/2020

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Looking Toward the Long Weekend: Travel Patterns, Gas Demand, and Truck Sales



Predicting Travel Patterns During a Pandemic


Memorial Day Weekend is typically a time for an early-summer getaway, but Americans may not be as eager to travel this year. This upcoming weekend will be somewhat of a test. The implications will be important for the oil industry, which faced sinking demand and prices during the pandemic as people practiced social distancing and avoided most travel.

Though some states have started reopening, gasoline demand still lags behind pre-pandemic levels. When cities first began to reopen, there was a spike in GPS-generated traffic congestion—but only briefly. After a quick surge, most people did not return to pre-pandemic habits.

Memorial Day Weekend is such a useful travel indicator that AAA has used it to forecast summer travel for the past 20 years. With that said, the company has decided not to issue a prediction this year, as the summer remains so uncertain. This decision echoes larger public firms who have pulled their forward guidance for the rest of 2020 due to the disruption and skepticism caused by the pandemic.

Gasoline Demand is All Over the Map


Though Americans’ behavior over the holiday weekend could be a predictor for their travel and leisure habits in the near-future, gas demand comes from other places too. Pre-pandemic, as much as 28% of gas demand was from drivers commuting to work. Even if people feel comfortable going on road trips, if offices do not reopen, demand for gas may continue to lag.

But Apple (AAPL) mobility data had traders hopeful heading toward the long weekend. Recent reports showed that driving direction requests were hovering around 5% under baseline. During the peak of the crisis, direction requests, which analysts also use to measure gas demand, were as low as 60% below the pre-shutdown baseline. Currently, demand for gas is roughly 30% below pre-coronavirus levels so the holiday weekend will be a bellwether stretch heading into the summer.

Pickup Sales Are Up This Spring


Though gas demand is low overall, people are starting to drive more. An interesting trend shows that consumers are also beginning to buy more pickup trucks. Particularly in America’s heartland, areas less affected by the coronavirus, the demand for pickup trucks is strong.

Pickup trucks are always a huge segment of the global auto industry. Now, as sales of cars and light trucks have dropped to their slowest pace in five decades, pickup sales are vastly outperforming the rest of the market. Demand is so high that some sellers worry they’ll run out of models. Fiat Chrysler Automobiles NV (FCAU), which makes the popular Ram model, just restarted its assembly line this week after a two-month shutdown, and General Motors Company (GM) is already running low on certain models after a 40-day strike shut down its plant last fall.

Some auto dealerships are also offering discounts on trucks, which is driving demand. Pickup sales accounted for 21% of auto sales in April, up from a monthly average of 13% to 14%. Memorial Day is often a time for big car sales. Data from the weekend could be an important indicator of how auto sales will perform during the rest of the summer.

Though the future of the auto industry and the oil industry remains uncertain, investors will be eager to see how Memorial Day Weekend plays out, and what that could mean going forward.


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