UBS economist Paul Donovan discusses how visible Oil prices at fuel stations interact with changing consumer behavior in major economies. He notes that US gasoline prices above USD 4 per gallon are framed as a crisis, yet demand trends in the United Kingdom (UK), United States (US), Germany and France show flat or lower motor fuel use versus 2015 and pre-pandemic levels. Donovan also highlights political choices around subsidizing fuel instead of using prices to encourage behavioral change.

Motor fuel demand and policy choices

“One of the most visible oil prices is that of motor fuels. In almost every country, the price is predominantly displayed by the side of the road. In the US, the rise above USD 4 per US gallon in the average price of gasoline is presented as a national crisis.”

“In the UK, demand for motor fuel is around the same level as in 2015—down 3.5% from its pre-pandemic level. Some of this is fuel efficiency and electric vehicles, but Britons are also driving about 0.8% less than in 2019.”

“In the US, motor fuel volumes are the equivalent of pre-pandemic levels and below those of 2015. It is a similar story in Germany and France.”

“Changing behavior means that consumers can cut back on motor fuel consumption. Pricing is one factor that can feed into that process.”

“The political desire to subsidize fuel, rather than allowing prices to push people to change their behavior (with governments offsetting hardship in other ways), needs to be considered in this context.”

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