Chart of the Day: US Miles Driven

$4.05+ average national gas costs and $140 barrel oil is having its effect: Demand destruction brought about by high prices has lead to Americans driving less.

Total vehicle miles traveled grew by nearly 3% a
year from 1984 to 2004, the rate of growth slowed suddenly in 2005 and
2006 and has declined since then:

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19gasgraphic190_2
"As the price of gasoline quadrupled over the last decade, American
drivers seemed to defy the laws of economics by pumping more into their
vehicles year after year.

But this is the year American drivers appear to be finally succumbing to price shock at the pump, according to a new report by Cambridge Energy Research Associates, a consulting firm affiliated with IHS Inc. It says the slowdown in the economy and soaring gasoline prices have finally persuaded Americans to drive fewer miles in fewer gas-guzzling vehicles.

“U.S. gasoline demand will likely decline in 2008 for the first
time in more than 17 years,” says the report to be released Thursday.
“For the first time since the 1970s and early 1980s the number of miles
driven by Americans has clearly begun trending downward.”

The Transportation Department reported on Wednesday that Americans
drove 1.8 percent fewer miles on public roads in April 2008 compared
with the same month last year, the sixth consecutive month of driving
mileage declines."

 

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Sources:
Driving Less, Americans Finally React to Sting of Gas Prices, a Study Says
CLIFFORD KRAUSS
NYT, June 19, 2008
http://www.nytimes.com/2008/06/19/business/19gas.html

Americans Drove 1.4 Billion Fewer Highway Miles in April of 2008 than in April 2007
DOT,
Wednesday, June 18, 2008
http://www.dot.gov/affairs/dot8408.htm

Traffic Volume Trends
http://www.fhwa.dot.gov/ohim/tvtw/tvtpage.htm

U.S. Vehicle-Miles http://www.bts.gov/publications/national_transportation_statistics/html/table_01_32.html

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What's been said:

Discussions found on the web:
  1. ali_M commented on Jun 19

    That’s it Ritzholz,
    I’m gonna drive up there and punch you in the nose. By the way… Bush said, in order to counter the demand destruction of gasoline he’ll be using Air Force One more often. That way, the economy will appear healthy b/c gas consumption will have increased.

  2. bluestatedon commented on Jun 19

    On the purely anecdotal side, I stopped off at my local AAA branch yesterday to make a payment, and while things were being processed I asked how the travel biz was doing. I was told that at this time of the season in past years all the employees would be going crazy cranking out TripTiks for vacation drivers. I was told those requests have stopped cold; people are just not driving anywhere requiring TripTiks. Of course we agreed that the cost of gas was the obvious proximate cause. Which means that soon we’ll see a headline stating “Vacation Driving Unexpectedly Declines in June.”

  3. Andy Tabbo commented on Jun 19

    Remember, 18-24 mos out gasoline demand is inelastic. It doesn’t matter what the price is in the short run, people still have to drive to work, etc. What we’re seeing is demand destruction that was seeded a few years ago. Expect to see further destruction years from now.

    – AT

  4. VennData commented on Jun 19

    We could solve this apparent drop in total miles by speeding up out national conversion to the metric system. Measured in kilometers, this number is 1.6 times higher.

    This would, unfortunately, also increase the apparent price for gas in dollars per liter; so a phased implementation is warranted.

  5. cm commented on Jun 19

    Andy Tabbo: While driving to/from the job(s), and on account of business, is a substantial and perhaps even the largest part of aggregate driving, there are other parts which can be whittled down — consolidating shopping trips, skipping dinners out (saves the dinner charges too), hanging out at home instead of weekend day trips, etc. And even the commute can be cut one or more days each week by working from home or consolidating shifts, in a number of cases, probably not for a majority of workers but still. And then I keep hearing claims of fuller car pool lanes in my local area.

  6. Metroplexual commented on Jun 19

    Andy Tabbo

    I have to agree with CM. This is an immediate response to recent price shocks. The demand may be inelastic but that is for necessary driving, discretionary driving is an “elastic” demand.

    The consumer is now very wary of how they drive and trip-chain more economically. What you will see next is people buying fuel efficient cars like we did in the 70’s in reaction to that price shock. This will include hybrids as well as other alt fuel vehicle that will be available. And who knows more transit usage than we have already seen?

  7. Jack commented on Jun 19

    All major highways need to be toll roads and the free lunch enjoyed by motorized vehicles (subsidized roads, free parking, zero carbon and low gas taxes, lack of law enforcement, etc.) needs to be ended in order to make a major change in our self-destructive habits and dependencies. The chart only shows recent years and does not illustrate the growth in mileage per capita and per household over the last four decades. Other countries have done a much better job in creating a diversified portfolio of transportation choices through better analytical data and creative solutions.

  8. Michael Donnelly commented on Jun 19

    I heard this was a safe Memorial Day weekend this year. Less highway death as there were fewer cars on the roads.

  9. DownSouth commented on Jun 19

    This is great news. Even though it’s just a baby step, Americans are finally beginning to conserve.

  10. johnnyvee commented on Jun 19

    I think that price of gas as a discouragement to consumers to travel is onw piece of the picture. What about layoffs and those not working but unaccounted for, i.e., all things real estate. One doesn’t drive much when there is no work.

  11. Francois commented on Jun 19

    USA has been built on cheap energy. We even indulged in the luxury of suburban sprawl.

    Now what? It is not only demand that is being destroyed, but an unsustainable way of life. Yes, it may return if H2 fuel-cells cars hit the mass market soon. But I doubt it: Honda and Toyota took a lot of criticism over the years for spending money in “nonproductive research” while the good money was made in SUVs and gaz-guzzlers.

    With such a mindset where the next quarter results are all that matters, how in the world are we going to solve the challenges ahead of us?

    In the meantime, let’s rediscover backyard county.

  12. JB commented on Jun 19

    3,000,000,000,000 miles per year
    divided by 300,000,000 americans =
    10,000 miles per year, per person.

    Assuming only 2/3rds drive (children, elderly, carless, public transport etc), that number goes up to 15,000 mpp,py each.

    Hmm. the number initially seemed high, but that seems to be in the ballpark. Don’t car depreciation estimates pin the estimated-miles-per-year-driven to be around 12k?

  13. jed commented on Jun 19

    we need to go back to 55mph federally mandated speedlimit

  14. Andy Tabbo commented on Jun 19

    The point I was trying to make is that the decrease in driving you see now is not a result of 4.00 gasoline. It is a result of gasoline breaking 3.00 bucks last year. We will see even weaker demand in the coming months and years.

    A perfect storm is brewing for extremely lower energy prices a few years from now.

    – lower U.S. demand
    – China finally caving in and beginning to lift subsidies
    – crack down on funds circumventing the speculative limits
    – structural change in the U.S. auto/truck fleet.

    I still think we see some higher prices in the short run as china buys up all the distillate to keep the lights on for the olympics and prevent mass rioting in the streets. By fourth quarter, though, the meltdown in energy will have begun. $60 WTI in 2009.

    – AT.

  15. claymeadow commented on Jun 19

    not a finance pro but like to read anyways (does practice micro-man-finance at home though) and have to say I hope people enjoy the less time in there cars. I know I do. Switched to a one-paycheck family about five years ago which cut our driving a good percentage. Love the extra time to do things like home-cooked meals and such.

  16. Sinomania! commented on Jun 19

    cm – yes to fuller car pool lanes, the drive from OC to Long Beach used to be a breeze but now the one lane for car pools is packed! No difference in speed anymore. Coworkers around me arranging car pools. I’ll be in one soon.

    AT – China’s electricity is generated overwhelmingly (just as in the USA) by coal. Keeping the lights on in Beijing for the Olympics – what an inane comment. Beijing does not have blackouts.

  17. Andy Tabbo commented on Jun 19

    Sinomania!

    I did not say that the power system in China was based on diesel. Of course nearly all the power in China is generated by coal or hydro. However, in the event electricity shortfalls, provinces have to resort to backup generating capacity which is fueled by diesel. It’s one of the many reasons for the huge diesel shortages in China. So, yeah, to ‘ensure’ that the lights stay on in the country, they are hoarding diesel.

    And these olympics are not just about beijing. The entire country will be on display. They do not want civil unrest across the country during the olympics.

    The hyper growth of china has caused huge inflationary pressures which are now causing massive strains. There are some serious problems brewing there.

    – AT.

  18. Michael Donnelly commented on Jun 19

    Good post as usual Barry, I took a look at the data and was intrigued by the urban vs. rural splits.

    Rural America has been in steady decline for years. Saying they’ve been in a 8 year recession is not going to far.

  19. DL commented on Jun 19

    Still too much traffic for my taste

  20. jz commented on Jun 19

    I figured you would have some oil nuts disputing the importance of this data.

    FWIW, China cut their gasoline subsidy today as well. That subsidy was 10% of their entire federal budget.

    If you look at Mastercard’s surveys, gas sales have been off as high as 6% YOY. On top of that, crude imports in the last week have been down by 500,000 to 900,000 bpd in YOY comparisons. That amounts to a 2.5 to 4% drop, but even that does not tell the whole story.

    What no one in the media has picked up is that the U.S. has increased exporting refined products to the tune of 300,000 bpd.

    Add it all up and you are talking about the U.S. using not 2% less but more like 5% less oil. (I wouldn’t trust the miles driven too much because given a choice these days, people are using their cars with better mileage more often.)

    5% may not sound like much, but world oil demand has only increased by about 10% since 2003.

    And the U.S. only uses about 40% of the oil in the developed world. If Europe and Asia cut demand like we are, that means 2.5 mbpd less demand. Now, you know why the Saudis are freaking. They don’t care what the price is until demand falls.

    Add in the new supply coming in over the next two years, and we could see six mbpd in spare capacity in 2009 if the current demand trends hold.

    You have heard of buying on the dips. Well, I am shorting on the hype. Hopefully, you saw oil spike on the rebel attack in Nigeria and went short, Barry. That is three in a row for this trend.

    Just like people ignored Mike Rothman in 2000 about a rising price of oil, they are ignoring him and his call of $45 oil now.

    How long can you keep charging $130 for something that at most costs $50 to produce? That is where Rothman’s $45 number came from, it was around the highest cost to produce cost.

    So I don’t mind shorting oil because the long term trend is definitely down.

  21. Simon commented on Jun 19

    1 gallon equals 3.8 liters. In New Zealand petrol is now over NZ$2 per liter. This equals NZ$7.6 per gallon. $NZ=0.77$US this means we are paying the equivalent of US$5.8 dollars per gallon.

    We have been paying more than the equivalent of $US4, which is $NZ1.38 per liter, for at least a couple of years.

    We would see US$4 per gallon as very reasonable.

    On another topic residential interest rates here bottomed out at about 5.5% in about 2002. This sparked the start of our own housing bubble. Residential interest rates are now about 9% and people are beginning to feel some real pain.

    If I find out what proportion of the New Zealand economy is service industry I’ll let you know.

  22. bad home cook commented on Jun 20

    Boy, you’d never know it to see the traffic driving into L.A. from camping in Santa Barbara today. Why bumper-to-bumper on a Friday at 1:15 pm? And a gallon of regular unleaded at $4.59 and counting…

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