Not only has the US economy started to improve, but low gasoline prices have spurred on something not seen in almost a decade, growth in distance travelled by automobiles.



While there are many reasons to think this is not the start of long run uptrend in the growth in distance travelled, the almost 4% rise in the year to March does highlight how economic agents can strongly respond to changes in prices.



Falling oil prices and the surge in crude inventories, just off the Q1 record highs but still well above normal, has resulted in a collapse in the US drilling rig count. Since September 2014, the number of oil drilling rigs operational in the US has fallen 61%.



"Given that it is most likely that these least productive wells will be the ones cut, then this reduces the growth in output from a 60% decline in rig count to only 13 percentage points", says Westpac.



But before getting too excited about a possible collapse in US crude oil production it has been estimate by IHS that shale oil production is highly skewed to a few very productive wells. They believe that the bottom 70% of new wells only yield about 16% of new production.



"This would be why the EIA estimates that US crude production stabilises this year, before growing again in 2016. Crude oil prices are expected to track sideway this year, which along with a broadly flat AUD around means crude oil prices should have little impact on Australia petrol prices until crude prices start to rise again in 2016", added Westpac.