The great recession in the US coincided with changes in consumer behavior that were unexpected, and to some extent still not explained. For decades, GDP growth and population growth were closely correlated with the lightbulb and the car....Americans drove more miles nearly every year, and used more electricity.
Now those correlations have been broken. Considering transportation specifically, analysts are publishing research on megatrends that attempt to explain the fact that cars are not returning to the road. Several variables have been implicated:
- Urbanization
- Work force participation
- Demographic shifts
- Technology
- Changing attitudes
- Lifestyle changes
Whatever the cause, and if such a trend continues at all, the second order question for the energy sector is the impact on fuel consumption. This requires consideration of fuel economy trends as well.
A high level perspective may be helpful in separating the major issues from the minor ones. The DOT recently released vehicle miles data for December 2013. Because there is high seasonality, and weather sensitivity in winter, it isn't safe to conclude much from monthly data, but in general the release is consistent with a low/no growth trend in miles driven.
Further analysis of the details indicates that interstate driving (both urban and rural) has been trending down vs arterial and surface street driving, but only slightly.
Most of the underlying trends that are blamed for the stagnation in miles driven are unlikely to reverse. The primary exception is workforce participation, which is at historic lows and could recover substantially.
The trends in fuel economy are also inexorably toward higher efficiency. Wide variations in estimates for mpg improvement are muted by the slow penetration rate of new vehicles into the large existing vehicle count, and by the longer life of newer vehicles. Projections also require assumptions about the future price of gasoline, adding uncertainty.
Here are a few relevant data sets.
Observations:
- Average mpg increase from 1990 to 2006: +2.2 mpg (not much)
- New car mpg increase from 1990 to 2006: +2.1 mpg (not much)
- From 2006 to 2012, new car mpg increased +4.5 mpg (much)
- The impact on fuel consumption, if average mpg rose by 4 mpg, would be a decline of about 1.2 million barrels per day of gasoline, or about a 15% decline.
So without speculating too much, the fact that mpg is improving at an increasing rate plus a 5 year stagnation in miles driven does suggest that unless Americans begin hitting the road again soon, the gasoline consumption trend has to head downward and could decline a long way.
Naive logic suggests that a few other points may be axiomatic:
- If one drives very little, mileage is a less relevant cost of ownership
- If one drives very little, a vehicle could last half of one's driving lifetime
- If gas taxes pay for road construction and maintenance, increased taxes may be required to maintain revenue. That could become a self reinforcing cycle that keeps gas prices high in a variety of scenarios.
- Energy independence, from a liquid fuels perspective, could be achieved even in a domestic peak oil scenario.
