American Car Drivers Cut Back Distance Traveled
FUTURE PUNDIT
For the last few years in some quarters I've read claims that American drivers will drive themselves to financial ruin before they respond to higher gasoline prices and cut back on driving. I'm more of the school that people will restructure their lives (change jobs, move to be closer to jobs, do less recreational driving, etc) out of necessity. My view is that Americans can cut their gasoline usage in half once the need arises (and it will arise as Peak Oil bites harder). Well, with oil north of $100 per barrel and price shocks biting hard American drivers traveled 4.3% fewer miles in March 2008 than in March 2007.
WASHINGTON -- Americans drove less in March 2008, continuing a trend that began last November, according to estimates released today from the Federal Highway Administration.
"That Americans are driving less underscores the challenges facing the Highway Trust Fund and its reliance on the federal gasoline excise tax," said Acting Federal Highway Administrator Jim Ray. The FHWA's "Traffic Volume Trends" report, produced monthly since 1942, shows that estimated vehicle miles traveled (VMT) on all U.S. public roads for March 2008 fell 4.3 percent as compared with March 2007 travel. This is the first time estimated March travel on public roads fell since 1979. At 11 billion miles less in March 2008 than in the previous March, this is the sharpest yearly drop for any month in FHWA history.
This is just the beginning. Note this comparison ends in March. Prices have gone much higher since then and still have higher to go this summer. So the cutbacks on driving will get even deeper. People will find lots of ways to cut back that take longer to do. They will move and choose jobs in order to cut back on commuter miles. Some will switch to buses and trains. Others will buy scooters and bicycles and give up cars for many uses.
Last time Americans cut back on driving was in 1979.
THE last time this happened Jimmy Carter was US president. In March, US driving fell an astonishing 4.3 per cent on a year earlier. It was first time driving has fallen in the month since 1979.
US driving began to taper off in November, according to Doug Hecox of the Federal Highway Administration, but at first it was thought the decline could be seasonal, because of bad weather. Then came March, and the largest year-over-year driving drop in the agency's recorded history, going back to 1942.
"We are beginning to see what we think is a very defensible trend beginning," Mr Hecox said.
People now get that the high gasoline prices aren't just a temporary spike. They've been hit hard enough for long enough that the psychology has shifted more toward fear. They don't want their road hogs pulling them down into poverty.
Cost of transportation fuels as a percentage of income is the really interesting number to watch. The portion of income going to transportation fuels is still below that in 1981. But that reflects a large growth in income and buying power that has taken place since 1981. In inflation-adjusted terms we are now paying more per gallon on gasoline than we were back then.
Americans spend 3.7 percent of their disposable income on transportation fuels. At its lowest point, that share was 1.9 percent in 1998, and at its highest, it reached 4.5 percent in 1981, said Ms. Johnson of Global Insight.
...
Also, Americans pay less to drive a mile today than they did in 1980, once the impact of inflation and gains in fuel efficiency are taken into account, said Lee Schipper, a visiting scholar at the transportation center of the University of California, Berkeley.
Mr. Schipper estimates that the cost of gasoline for each mile traveled will be about 15 cents this year. That is nearly three times the low of 5.6 cents a mile reached in 1998, when fuel efficiency peaked and prices were at their lowest. But it is still cheaper than the record paid in 1980 of 17.1 cents a mile, adjusted for inflation.
A shift toward smaller and more fuel efficient cars will lower the cost per mile traveled. Plus, people will find more ways to reduce the number of miles traveled. How fast all that happens determines how far up prices can go. The more demand destruction at any one price point the less the need for a still higher price point.
If we hit $200 per barrel then gasoline will cost $6 to $7 per gallon in the United States. It already costs that and more in Europe now. So the Europeans will be paying $10 per gallon when Americans are paying $6 per gallon.
If oil hits $200 a barrel, which is the upper end of Goldman Sach's prediction for prices over the next six months to two years, the gasoline picture changes quite dramatically. At $200 a barrel, crude alone would cost $4.76 a gallon. Add on the costs of refining and distributing as well as taxes, and pump prices could rise to a range of $6 to $7 a gallon.
SUV and truck sales are tanking.
According to sales tracker Autodata, full-size pickup sales were down 22% in April compared to a year earlier, while and large SUV sales plunged 32% over the same period.
Meanwhile subcompact sales are booming.
Autodata Corp. reports that sales of large SUVs fell 28 percent in the first quarter this year at a time when subcompact sales rose 32 percent.
Even if some new oil projects can boost world oil production by a few more million barrels of oil per day in the next few years that oil is headed for Asia. Rising Asian demand combined with rising demand in oil producer countries means less oil available for Western industrialized countries. Next time you buy a car get the most fuel efficient one you can stand to drive. We are years away from the point where the crisis eases and energy for transportation starts getting cheap again
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