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Tuesday, September 21, 2010 9:59 AM

What does Petroleum Distillates usage say about the Recovery?

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Reader Tim Wallace sent me an interesting series of charts on petroleum usage, GDP, and Housing. This post is on petroleum distillates.

Tim writes ...

Hello Mish

The following chart shows a drop in oil distillates usage stared in 2006, the same year the housing plunge started.

In my early career at Exxon I was taught to watch these numbers. Any time they fell below 0.8%, you could expect a stagnant economy, anytime below 0.5%, a recessionary economy. Negative numbers are very bad.

I used this chart to exit the market in 2008, well before the crash.

Oil Distillates Usage Decline From Peak

click on any chart for sharper image

This past summer, distillates usage was propped up with paving stimulus projects, yet we are still more than 12% down from peak usage.

That oil usage is still down this much from the prior peak in spite of those road projects is further proof there has been no intrinsic recovery, just a financial/banking recovery.

Thanks Tim.

Here are two more charts to consider.

Historic Growth Levels

2010 Week by Week vs. Peak Usage

Not Your Typical Recession or Recovery

Please consider the following chart courtesy of Dave Rosenberg's September 16, 2010, Breakfast with Dave.

In the typical recovery, GDP, new home sales, corporate earnings, retail sales, shipments, and orders are all making new highs after 33 months. Instead, none of those items are. Add oil distillates usage to the list.

Mike "Mish" Shedlock
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