Update on US adaptation to higher oil prices
Posted by Stuart Staniford on December 8, 2006 - 12:17pm
Topic: Demand/Consumption
Tags: peak oil, vmt [list all tags]
We now have VMT (vehicle miles traveled) data through August, and that allows us to see what happened during the summer when oil (and thus gasoline) prices were very high. For context, here's the price history:
(As an aside, it appears to me that in the last three years, as the market has got tighter and tighter, it has developed an interesting seasonal structure where there is a spring run-up in price, and then a larger summer run-up in price, and then an autumn price drop. However, these features are getting earlier and earlier, and larger and larger, each year. I think the drop in price in September/October fits this narrative, and I expect prices will start to run up again late this year or early next year (though probably not too much higher than they got this year, absent worsened geopolitical problems).
So if we look at what drivers did in response to these prices:
We find that the extra high prices of summer 2006 were enough to cause a slight drop in VMT (against the traditional few percent/year rise and the general flattening of the last couple of years). Looking at the same thing a different way, the following graph shows a longer history of monthly VMT data together with a 12 month trailing average (which erases the seasonal signal), and a linear fit to the latter.
As you can see, US VMT generally rises fairly relentlessly, but the high prices of the last couple of years have been enough to stem the tide, and indeed now cause it to just begin to drop slightly (though it might flutter up again now that prices have eased somewhat).
Last time I discussed this, I developed a method for estimating the fuel economy of the deployed US vehicle fleet (basically by dividing monthly gasoline consumption in the US by monthly VMT with an approximate correction for diesel powered miles). An update on that picture looks as follows:
In general, the recent price rise has not caused anything noticeable to happen to the long-term very slow rise in fuel economy. Transportation adaptation to recent high oil prices appears to have come overwhelmingly from curtailment of VMT growth (so far).
These posts are a lot of work, and the authors appreciate your helping them get more readers for their work however you can. These are charts that many people can understand...send them along to whoever you think can be persuaded by data...
So, is there a time delay effect? Is it possible that current fuel prices will actually impact demand, but it will take time for levels of personal debt to increase to unbearable levels first? Personally, I think not, fuel costs are still nothing compared to vehicle costs, and once people have that sunk cost...
I'm starting to think that a larger war in the ME is more likely to trigger a crisis. Oil supply is just too tight and the whole world knows it, including the people that find GWB to be the threat.
What a mess
16 years ago I bought a 800 watt microwave for $118.00. 4 years ago I bought another one for $29.95.
$29.95- builds it, ships it across the ocean, puts it on a truck, delivers it to the store, puts it on the shelf, pays the wages of the people who work there, thier light bill, heat bill, property taxes etc., How much did the people who built the damn thing get ($.75 HR?).
We can afford higher fuel prices in relation to wages because of this. For how long...?
It takes time for people to buy new cars. Any reasonable oil price doesn't cause people to junk their cars for new ones, it just causes them to consider it more carefully next time they buy a car. If the average car is on the streets 5 years, then you'd expect this whole cycle to flip over in about 5 years, but wait, it's worse than that. First there has to be demand (a year of high gas prices, with no end in sight convinces consumers that they need a more efficient car), then there needs to be redesign, and retooling, and if things keep up, in 3-4 years, new efficient cars are being produced in large numbers. So, all told, I think it takes around 10 years, give or take, and the price has to stay consistently high for all or most of that time. If that were to happen, then VMT would start to fall and efficiency would start to rapidly climb.
Also, GM and Ford would start to rapidly enter chapter 11, as their executives are hell bent on producing gas guzzlers even if it kills them, which it of course has indeed been doing.
US suburbia will see boarded up homes in the coming recession/depression IMHO.
Best Hopes for a better Urban Form,
Alan
Its relentless. How could it be otherwise?
Could it be otherwise? Oh Please. Which scenario did you want? I just spent all night running alternate Hubbert numbers.
I'm afraid not, Nate.
This goes back to a classic conversation that happened with "Old Mossy."
Can the sum be greater than the parts?
Not in this case.
Demand can never be higher than production when every order is filled every day.
Sorry. What are we celebrating?
Even Tertzakian, who avoids the words "peak oil" expects a "break point" as reservoir depletion overrides discovery and produciton.
How could it be otherwise?
Even as a bit of a VMT skeptic (not that confident in the measure) I think this is positive news. The graph shows us what we want to see - a deflection from past patterns in response to new conditions.
We wouldn't want a "trajectory" to stubbornly continue as prices rise past the production peak. We'd want to see responses.
FWIW, I think a similar graph of finished gasoline consumption (and diesel) would be nice. If gasoline consumption does not deflect (from its past increase) at all, something is wrong with the VMT data.
http://tonto.eia.doe.gov/oog/info/twip/twip_gasoline.html
http://tonto.eia.doe.gov/oog/info/twip/twip_distillate.html
One cautionary note is that we have just gone through the transition to ULSD, so the diesel numbers are kind of wacky for the past 6 months or so.
If you download the whole xls, you get consumption data going back many years and even decades (depends on the category of data, and when they started to collect it).
If we look at gasoline:
you don't see much drop in gas consumption over 2005, but in 2005 we had Katrina, so I would almost want to see curves for 2003 and 2004 as well to see how this year compares to more "normal" years.
Unfortunately it shows something the other doesn't, a new high in 2006. Oh well, count our blessings I guess ... and wait to see what next summer's prices bring.
Perhaps some drivers actually did conserve gas and some decided to take the plane instead of driving cross country. Also note that most transit systems, especially rail, are seeing 5 to 15% increases in ridership. So, perhaps some drivers on the lower income scale have switched to transit for their commute to work. Amtrak has also seen ridership & revenue increases on its short corridor ((350 mi or less) trains.
I doubt that gas demand and vehicle miles travelled will decline much until the price is $5/gal or the US economy hits the brakes/growth declines. With higher prices some drivers switch to higher milage vehicle, unless they are out of work and cannot afford a newer higher mile per gallon car. Bad effect of a recession caused by high gas prices is the lower income drivers often lose their jobs and thus do not have the ability to trim their gas bill by getting into a higher mpg vehicle.
If we enter a recession next in year or two oil prices may not fall like in past recessions, unless we drag down China, India, & oil exporting countries with us. If the export market for oil has declining supply, as many on TOD have predicted, the world will see oil prices slowly rise even with demand declines induced by recession.
The pattern in pricing that todays writer has documented, reminds me of the OSB - oriented strand board - price pattern, (it is a cheap alternative to plywood). I saw a similar pattern...that lasted several years. So I jumped on it. I bought a truck load way in advance to when I needed it. I was going to save Thousands!..so I thought. I even had dreams of buying a warehouse full the next year!
You guessed it...I bought at the PEAK! In March of 2005. The price plummeted for months after that...and only came back after hurricane Katrina.
Bottom line: If Patterns held, we'd all be rich.
I know they drive more than Americans, due (I guess) to further distances. Given that Vermont and Wyoming are highest VMT in USA (per your post last summer), and they had sharpest drop post Katrina, I bet there is a correlation.
Then again, there is (like in everything) a differnce between needs and wants. Perhaps Canadians just need to drive more (to get to work and grocery store, etc)
In both countries it appears that higher prices are having an effect on demand, when the problematic is examined from the perspective of registered vehicles.
Transport truck mileage is a separate issue.
I use data from the Bureau of Transportation Statistics and from Statistics Canada.
In 1990 the US population was 246 million. Now its 300 - thats total growth of 21%
In 1990, according to Stuarts graph (roughly)VMT was 5.5 and now is about 8.4 so an increase of 47%
So over 15 years VMT has grown more than double than population. However, on an annual basis they are both in the 1%+ range, so population does explain a good deal of the phenomemon.
Looking at passenger vehicles only, total mileage increased by 37% from 1990 to 2004. The number of registered vehicles increased by nearly 29%. The difference is accounted for by an increase in miles per registered vehicle in that period. The increase in miles per registered vehicle was continual from 1980 to 2001 and then declined in 2003 and 2004. We await data for 2005. It does appear that price is impacting mileage, though only slightly as yet.
Data is available from the Bureau of Transportation Statistics, though I used numbers from the Federal Motor Carrier Safety Administration above.
There is indeed a leveling off going on. I took the annual VMT totals for the USA and divided them by the total number of residents in the country at that same point in time.
Note the last (slight) decline around the time of the Gulf War. Otherwise growth has been steady for the last quarter century as we have collectively moved to increasingly less dense living patterns.
I know in Vermont, prices went from $2.20 to $3.60 and people were freaking out. But then they went back down to $2.80 and it seemed everything was ok. People were breathing easy and didnt seem to realize that prices were still up 25% from 2 months earlier.
Would be an interseting policy trick to put a $2 gasoline tax then fake some controversy and have some politicians take credit for reducing it to only $1, etc. Gradual steps like this - 2 steps forward, 1 step back, giving the consumer perceived plateaus of relative cheapness.
1970- 2.80%
1981- 4.60% (all time high)
1990- 2.40%
1999- 1.75% (all time low)
2002- 1.85%
2004- 2.25%
2006- 3.50%
The rise from the low has been sharp, but so far the impact on consumption is relatively muted as it has come from very low levels and is still well below the highs of the 80's.
I do have a nice chart but I still can't figure out how to upload them here. Any help..please?
First you need to create an image file of your graph on your computer. If you're using Excel, select the outer background of the graph to pick up the whole thing. Copy it to the clipboard, then switch to something like MS Paint to paste and save. Use a file format like jpg to cut down on size.
Next, go online to somewhere like [imageshack.us] and upload the image there. They'll give you the appropriate <img ...> tag format to insert into the text of your comment. To make sure you image fit's in the page, specify the width="100%" parameter inside your img tag.
So your image reference in your comment will look something like this:
<img src="http://imageshack.us/some/file.jpg" width="100%" />
Here's an example I prepared earlier ;-)
Hope this helps.
[IMG]http://img247.imageshack.us/img247/6967/fuelpz0.gif[/IMG]
Try
<img src="http://img247.imageshack.us/img247/6967/fuelpz0.gif">
AHA!!!
Thks very much indeed
Aha is right. We will play with you bitches.. Cuz that's all you are.
Sorry.
Like Paris and Nicole say...
WE LOVE YOU - BITCHES!
Rock 'n' Roll...
He's been doing this all night!
Im writing a post on this now for next week called "Peak Oil, Global Trade, and Liebigs Law"
Brian,
Don't you understand, this is how you make money:
- Take control of a large corporation.
- Pay yourself, senior management, and board members obscene salary's and give outrageous perks like company limo's, birthday parties in Italy, company apartments, etc...
- Cut Costs (usually staff)
- Offer big ticket items for cheap to attract large numbers of customers, and make year over year numbers look good. (Sales $$$, number of customers, etc...)
- Short change corporate pension obligations to make the accounting appear that you are making a profit.
- Borrow as much money as possible through the financial markets insuring you have the cash to continue operations at a loss for years while paying yourself and other board members the above mentioned outrageous salaries.
6a. Repeat as often as posible.7. When the Ponzi scheme finally collapses, put the company in receivership, and walk away with millions (billions?) that you recieved as lawful compensation not to mention your fully insured golden parachute.
Wall Street has sold it's sole to the corporations at the expense of the little guys. If you're investing in Stock - caveat emptor.