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Will rising gas prices impact boat sales?

As our industry prepares for next week’s American Boating Congress in Washington, D.C., there’s no question a priority issue will be the crucial need to stop the increase of ethanol into our fuel supply and revise the broken Renewable Fuel Standard.

Meanwhile, gas prices are on the rise, so it’s timely to look ahead for any expected negative impact on boat sales. Today, crude oil prices are at their highest level in more than three years and are expected to climb higher, likely carrying prices at the pump with them. But there’s no reason for alarm.

So said Tom Kloza, global head of energy analysis for Oil Price Information Service, while addressing the recent National Association of Convenience Stores meeting in Chicago. Overall, Kloza contends the outlook for fuel in the final years of this decade will largely be “just a little more or less” of what we’ve seen so far.

That said, he also pointed to some interesting realities, good and not so good, about the short and longer-term outlooks for fuels in the United States. Here are some highlights, as reported by CSP magazine, which covers convenience and petroleum retailing:

  • Looking back from 2011 to 2014, Kloza says, consumers paid $1.4 trillion for gas. From 2015 to 2018 — assuming a projected average of $2.56 per gallon this year — consumers will spend $1.33 trillion. Even if we assume Congress ups the federal gas tax by 23 cents per gallon this year, consumers would still save a half-trillion dollars in the four-year period. That’s a lot of disposable income to, say, buy and operate boats.
  • The biggest factor that could influence 2018 pricing is exports. Kloza explained that since the ban on exporting refined products was lifted in 2015, the United States has been shipping record volumes of finished motor fuel. “We’ve had a number of weeks where we’ve seen exported 1 million barrels of gasoline per day,” he said. “This is butting up against domestic demand, which has averaged 9.3 million barrels per day. That number is expected to rise to 9.8 million barrels per day this summer. If you’re a refiner in the Gulf Coast, Texas or Louisiana, the world is your oyster. But with more gasoline being sent out of the country, this could put pressure on U.S. supply and, ultimately, prices.”
  • Looking ahead, the Environmental Protection Agency has announced it will revisit greenhouse-gas-emission standards in cars and light trucks for model years 2022 to 2025. In concert with the National Highway Traffic Safety Administration, which oversees Corporate Average Fuel Economy, standards, the EPA would revise the average fleet target of 54.5 mpg downward. The implications: “Freezing the CAFÉ standards at model-year 2021 doesn’t lower the demand curve; it just delays it a little bit,” Kloza said. “Most of the drops in demand will still happen from 2020 to 2025. Without a recession, demand stays where it is through 2020.”
  • Finally, a new regulation set to take effect in 2020 will be the most dramatic change since the Clean Air Act of 1970. Container ships will be required to switch to low-sulfur fuel. “Put another way,” explained Kloza, “a large container vessel right now emits more sulfur in a year than 10 million to 12 million diesel cars. We’re going to go to one-seventh of that. The net result is that about 4 million barrels per day of global diesel demand will shift to marine blending.”

Kloza noted that this container ship requirement will “send prices higher astronomically.” He foresees the price of diesel hitting $35 to $40 a barrel, which is $1 per gallon more than the price of crude. “It will hurt light diesel fuel sales in the U.S.,” he said, “and the expected timing of the price increases [is] late 2019.”

Still, neither supply (normally the prime concern of boaters) nor price at the pump, which has little impact on boaters, are expected to be a problem for our industry in the near term. Clearly, when it comes to any discussion about fuel, the increase in ethanol remains the greatest threat to millions of boating families.

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