Polar Vortex Caused Large Swings in Gasoline, Diesel Demand Across the U.S. Mid-Continent

oil pipeline in the winter
Blog February 04, 2019

The 2019 polar vortex event in late January prompted a surge in gasoline and diesel demand January 27 through January 29 in affected states ahead of the dip in temperatures, setting record-low temperatures across the U.S. Midwest and Great Lakes region. Gasoline and no. 2 diesel demand fell significantly amid the record-breaking cold but appears to have had a muted effect on total U.S. gasoline and transportation diesel demand for week ending February 1, according to Genscape Supply Side data.

The polar vortex weakened over the Arctic Circle, allowing Arctic air to dip as far south as northern Missouri, eastern Nebraska, and northern Kentucky. Temperatures dropped to record lows across North Dakota, South Dakota, Minnesota, Iowa, Illinois, Indiana, Michigan, Wisconsin, Missouri, Kentucky, Ohio, and upstate New York. The extremely low temperatures and wind chill factors forced school closures and travel warnings across the affected area.

Total U.S. gasoline demand for week ending February 1 looked to be higher from the previous week, according to Genscape’s Weekly Gasoline Demand Report (WGDR) data, but still came below year-ago levels. Weak gasoline rack activity January 30 and January 31 during the polar vortex event somewhat offset the surge in gasoline rack liftings ahead of the inclement weather January 27 to 29. Genscape’s Weekly Gasoline Demand Report for week ending February 1 showed a 37 percent increase from the previous week’s report to 9.012mn bpd. This is still 0.8 percent below WGDR levels for the same week in 2018.

genscape supply side weekly gasoline demand report and yearly comparisons
Figure 1. The surge in gasoline rack activity ahead of the polar vortex increased U.S. gasoline demand, but still felt short versus 2018 levels. 

Similar to gasoline, a burst of no. 2 diesel rack liftings in affected states ahead of plummeting temperatures also contributed to total U.S. no. 2 diesel demand, despite the significant drops in no. 2 diesel rack activity January 30 and January 31. An analysis of Supply Side Prime Normalized data, an estimate of regional and U.S. refined products demand using EIA Monthly Prime Suppliers data, total U.S. no. 2 diesel demand for week ending February 1 increased 1.5 percent from the previous week to 3.95 mn bpd.

genscape supply side prime normalized total u.s. no. 2 diesel, weekly avg
Figure 2. Robust diesel rack liftings ahead of the polar vortex supported U.S. diesel demand growth for week ending February 1.

The forecasted inclement weather prompted a spike in gasoline and transportation diesel rack activity January 27 to January 29 relative to the previous week, mainly in PADD 2, which in turn, boosted total U.S. gasoline and no. 2 diesel rack activity from the previous week. PADD 2 gasoline rack activity jumped 29 percent from the previous week January 27 and 26 percent January 29 ahead of the polar vortex event. As a result, total U.S. gasoline demand was 7 to 16 percent above the previous week, January 27 through January 29 (see graph 4). Gasoline liftings in PADD 2 then fell to 13 percent below the previous week Jan. 30 and 11 percent January 31 as the extreme weather hindered demand.

gasoline rack activity weekly change, PADD 2 and total U.S.
Figure 3. Increased gasoline rack liftings ahead of the polar vortex pushed PADD 2 and total U.S. gasoline demand higher Jan. 27 to Jan. 29 from the previous week, and then fell as the extreme weather slashed gasoline demand in the affected states. 

For no. 2 diesel, the surge in PADD 2 demand ahead of the polar vortex also contributed to week-on-week changes in total U.S. demand. No. 2 diesel rack activity in PADD 2 jumped 26 percent January 26, 27 percent January 27, and 11 percent January 29 from the previous week. As a result, total U.S. no. 2 diesel rack activity increased 12 percent January 27 and 11 percent January 29 from the previous week. By the end of the week, no. 2 diesel rack activity fell across PADD 2 and across the U.S. from the previous week, dropping 20 percent January 30 and 12 percent January 31 in PADD 2. Meanwhile, rack liftings declined 5 percent January 30 and 4.5 percent January 31 for the total U.S.

No. 2 diesel rack activity weekly change, PADD 2 and total U.S.
Figure 4. Total U.S. and PADD 2 diesel rack activity grew from the previous week ahead of the polar vortex, and then fell on a week-on-week basis due to reduced demand Jan. 30 and Jan. 31.

On a state basis, nearly every state in the affected polar vortex region had double-digit gasoline demand weekly growth January 29 ahead of the weather event. North Dakota gasoline rack activity was up 98 percent January 29 from the previous week, followed by Ohio with a 91 percent week-on-week increase. In Illinois, the state with the largest gasoline rack activity, week-on-week rack activity grew 31 percent January 29. On January 30 and 31, gasoline rack activity fell significantly across these states, led by Iowa, which fell nearly 46 percent from the previous week January 30. In Illinois, gasoline rack activity declined nearly 15 percent from the previous week January 30. On January 31, Michigan and Indiana rack activity led the week-on-week declines in gasoline rack activity, with liftings falling 34 percent and 24 percent, respectively.

gasoline state level rack activity % week on week change
Figure 5. Gasoline rack activity surged from the previous week ahead of the inclement weather, and then dropped Jan. 30 and Jan. 31 as temperatures fell to record lows across the affected states.

For no. 2 diesel, rack activity rose in most states on January 29 ahead of the polar vortex event. Nebraska diesel rack liftings increased 105 percent January 29 from the previous week, followed by Kentucky with a 34 percent spike January 29. On January 30 and January 31, diesel rack activity decreased significantly on a week-on-week basis across the affected states, with diesel demand in Iowa taking the hardest hit – down 67 percent January 30 and nearly 40 percent January 31 from the previous week. Illinois, the affected state with the largest diesel rack activity, saw diesel liftings fall 33 percent January 30 and nearly 41 percent January 31 from the previous week amid the extreme weather.

no. 2 diesel state level rack activity % week on week change
Figure 6. Diesel daily rack activity surged across the affected dates Jan. 27 to Jan. 29, and then collapsed compared to the previous week Jan. 30 and Jan. 31 amid the polar cortex event.

Conclusion

The 2019 polar vortex event brought temperatures to new record lows but did not have the expected depressive impact on weekly demand for gasoline and distillate as expected due to consumers filling tanks ahead of the inclement weather. This could, however, have a weakening effect on gasoline and diesel demand for week ending February 8, as the pre-stocking by consumers ahead of the extreme weather could inhibit the need to buy gasoline and diesel in the days following the polar vortex (January 30 to January 31).