Tuesday, May 13, 2008

 

Fuel Efficiency Continues to Decline

Kevin Drum observes that people respond to higher gas prices by driving less.

He fails to notice that along with the decline in fuel production is a decline in GDP growth.

He also fails to notice that miles driven have decreased much more than fuel production. That's right, fuel efficiency is declining with higher fuel prices.

According to Kevin, fuel production has declined by .7%. Average Daily Miles Driven have declined by 5%.

Some of this decrease in efficiency is due to increasing population and limited growth in infrastructure. Some may be due to people forgoing long trips to recreational destinations. But none of this comes close to explaining a 5% decline in driving. It's hard to believe that long recreational drives are a big part of American culture, let alone the greater than 5% of driving necessary to drive down efficiency.

I have my own theory. Markets only perform well when there is good flow of information. Because of people's misconceptions of what is efficient and how they affect traffic, they are modifying their behaviour in counter productive ways.

Popular belief is that people will notice their decreased fuel efficiency and correct their mistakes. However, among other complications, I believe gas prices are nowhere near high enough to get people to seriously consider the consequences of their actions.

[UPDATE: Giffen Behavior may contibute to decreasing efficiency]

Comments:
And all this time I thought it was the perpetually porked-up cars we've been driving, with the endless demands for more safety and luxury...
 
You think most of the population replaced their cars with nearly 5% less efficient ones last year?
 
The problem is that his proxy is imperfect. He's measuring gasoline production by refiners, and if gasoline stocks change, then it doesn't reflect consumption. Often it's a good proxy, but it's not very good in the period he choose, the first 18 weeks of the year. (Ending at the end of April.)

Look at the EIA stats on gasoline stocks. (Mouse over "Gasoline" in the lower-left Stocks graph.)

Also look at the percentage breakdown of the price of gas.

You'll see that late last year through April of this year, gasoline stocks increased as refiner margins decreased and stayed low. Both support a single conclusion-- refiners were producing more gasoline than people were using. The increase in the price of gasoline, driven by crude, caused a demand decrease for gasoline that meant that refiners actually had extra capacity for the first time in a long time. This drove down their margins and caused stocks to increase.

In other words, consumption went down in that period much more than the refiner production figures show. This clears up some of the mystery.
 
It certainly does. In addition, I wonder if exports have gone up as well.
 
Here's the demand data.

(Gasoline supplied to american consumers I believe)
 
50 week moving average gasoline supplied (last column):

Jan 06, 2006 8950 9194
Jan 13, 2006 8859 9193
Jan 20, 2006 8826 9192
Jan 27, 2006 8879 9189
Feb 03, 2006 8967 9185
Feb 10, 2006 9083 9186
Feb 17, 2006 9046 9185
Feb 24, 2006 8951 9182
Mar 03, 2006 9057 9181
Mar 10, 2006 9106 9180
Mar 17, 2006 9100 9175
Mar 24, 2006 9054 9176
Mar 31, 2006 9063 9174
Apr 07, 2006 9297 9174
Apr 14, 2006 9100 9167
Apr 21, 2006 9012 9157
Apr 28, 2006 9099 9150
May 05, 2006 9346 9146
May 12, 2006 9327 9146
May 19, 2006 9193 9143
May 26, 2006 9430 9136
Jun 02, 2006 9367 9136
Jun 09, 2006 9413 9136
Jun 16, 2006 9429 9135
Jun 23, 2006 9540 9135
Jun 30, 2006 9645 9138
Jul 07, 2006 9621 9142
Jul 14, 2006 9569 9145
Jul 21, 2006 9573 9148
Jul 28, 2006 9639 9161
Aug 04, 2006 9697 9184
Aug 11, 2006 9530 9199
Aug 18, 2006 9571 9214
Aug 25, 2006 9610 9231
Sep 01, 2006 9622 9249
Sep 08, 2006 9368 9257
Sep 15, 2006 9229 9263
Sep 22, 2006 9287 9268
Sep 29, 2006 9081 9264
Oct 06, 2006 9242 9266
Oct 13, 2006 9298 9270
Oct 20, 2006 9511 9277
Oct 27, 2006 9499 9283
Nov 03, 2006 9256 9282
Nov 10, 2006 9110 9278
Nov 17, 2006 9149 9276
Nov 24, 2006 9320 9275
Dec 01, 2006 9477 9286
Dec 08, 2006 9394 9298
Dec 15, 2006 9491 9312
Dec 22, 2006 9229 9319
Dec 29, 2006 9247 9325
Jan 05, 2007 9201 9328
Jan 12, 2007 9060 9328
Jan 19, 2007 9008 9329
Jan 26, 2007 9090 9330
Feb 02, 2007 9136 9330
Feb 09, 2007 9061 9330
Feb 16, 2007 9198 9333
Feb 23, 2007 9121 9334
Mar 02, 2007 9191 9332
Mar 09, 2007 9158 9333
Mar 16, 2007 9240 9338
Mar 23, 2007 9250 9341
Mar 30, 2007 9491 9344
Apr 06, 2007 9472 9347
Apr 13, 2007 9247 9348
Apr 20, 2007 9163 9343
Apr 27, 2007 9260 9340
May 04, 2007 9344 9339
May 11, 2007 9404 9338
May 18, 2007 9433 9336
May 25, 2007 9485 9333
Jun 01, 2007 9495 9330
Jun 08, 2007 9487 9328
Jun 15, 2007 9591 9329
Jun 22, 2007 9575 9327
Jun 29, 2007 9557 9324
Jul 06, 2007 9663 9327
Jul 13, 2007 9710 9330
Jul 20, 2007 9688 9332
Jul 27, 2007 9662 9333
Aug 03, 2007 9575 9337
Aug 10, 2007 9572 9344
Aug 17, 2007 9762 9354
Aug 24, 2007 9626 9366
Aug 31, 2007 9577 9373
Sep 07, 2007 9393 9375
Sep 14, 2007 9247 9369
Sep 21, 2007 9235 9364
Sep 28, 2007 9120 9361
Oct 05, 2007 9200 9363
Oct 12, 2007 9253 9365
Oct 19, 2007 9373 9366
Oct 26, 2007 9355 9364
Nov 02, 2007 9367 9363
Nov 09, 2007 9187 9357
Nov 16, 2007 9222 9356
Nov 23, 2007 9356 9359
Nov 30, 2007 9266 9360
Dec 07, 2007 9348 9366
Dec 14, 2007 9287 9372
Dec 21, 2007 9446 9380
Dec 28, 2007 9286 9383
Jan 04, 2008 9304 9388
Jan 11, 2008 9116 9386
Jan 18, 2008 8964 9383
Jan 25, 2008 8940 9378
Feb 01, 2008 8916 9373
Feb 08, 2008 9020 9368
Feb 15, 2008 9125 9365
Feb 22, 2008 9045 9356
Feb 29, 2008 9071 9347
Mar 07, 2008 9131 9345
Mar 14, 2008 9071 9343
Mar 21, 2008 9116 9340
Mar 28, 2008 9330 9339
Apr 04, 2008 9286 9337
Apr 11, 2008 9338 9335
Apr 18, 2008 9215 9329
Apr 25, 2008 9189 9323
May 02, 2008 9311 9319
May 09, 2008 9343 9314
May 16, 2008 9359 9309
May 23, 2008 9373 9305
May 30, 2008 9129 9294
 
6 week moving average:

Jan 05, 2007 9201 9340
Jan 12, 2007 9060 9270
Jan 19, 2007 9008 9206
Jan 26, 2007 9090 9139
Feb 02, 2007 9136 9124
Feb 09, 2007 9061 9093
Feb 16, 2007 9198 9092
Feb 23, 2007 9121 9102
Mar 02, 2007 9191 9133
Mar 09, 2007 9158 9144
Mar 16, 2007 9240 9162
Mar 23, 2007 9250 9193
Mar 30, 2007 9491 9242
Apr 06, 2007 9472 9300
Apr 13, 2007 9247 9310
Apr 20, 2007 9163 9311
Apr 27, 2007 9260 9314
May 04, 2007 9344 9330
May 11, 2007 9404 9315
May 18, 2007 9433 9309
May 25, 2007 9485 9348
Jun 01, 2007 9495 9404
Jun 08, 2007 9487 9441
Jun 15, 2007 9591 9483
Jun 22, 2007 9575 9511
Jun 29, 2007 9557 9532
Jul 06, 2007 9663 9561
Jul 13, 2007 9710 9597
Jul 20, 2007 9688 9631
Jul 27, 2007 9662 9643
Aug 03, 2007 9575 9643
Aug 10, 2007 9572 9645
Aug 17, 2007 9762 9662
Aug 24, 2007 9626 9648
Aug 31, 2007 9577 9629
Sep 07, 2007 9393 9584
Sep 14, 2007 9247 9530
Sep 21, 2007 9235 9473
Sep 28, 2007 9120 9366
Oct 05, 2007 9200 9295
Oct 12, 2007 9253 9241
Oct 19, 2007 9373 9238
Oct 26, 2007 9355 9256
Nov 02, 2007 9367 9278
Nov 09, 2007 9187 9289
Nov 16, 2007 9222 9293
Nov 23, 2007 9356 9310
Nov 30, 2007 9266 9292
Dec 07, 2007 9348 9291
Dec 14, 2007 9287 9278
Dec 21, 2007 9446 9321
Dec 28, 2007 9286 9332
Jan 04, 2008 9304 9323
Jan 11, 2008 9116 9298
Jan 18, 2008 8964 9234
Jan 25, 2008 8940 9176
Feb 01, 2008 8916 9088
Feb 08, 2008 9020 9043
Feb 15, 2008 9125 9014
Feb 22, 2008 9045 9002
Feb 29, 2008 9071 9020
Mar 07, 2008 9131 9051
Mar 14, 2008 9071 9077
Mar 21, 2008 9116 9093
Mar 28, 2008 9330 9127
Apr 04, 2008 9286 9168
Apr 11, 2008 9338 9212
Apr 18, 2008 9215 9226
Apr 25, 2008 9189 9246
May 02, 2008 9311 9278
May 09, 2008 9343 9280
May 16, 2008 9359 9293
May 23, 2008 9373 9298
May 30, 2008 9129 9284
 
Aaron, that's a refining output number also, I believe. (I could be wrong.) The EIA numbers for total gasoline sold in the US by prime suppliers to gas stations are here. They show a declines of 2.5%-4% year over year in January, February, and March 2008.

I do concede that it's also possible that people with efficient cars more likely to be price sensitive about gas, and thus be the first to moderate their use. That could contribute. Part of that could be that many pickup trucks and vans could be used for reasons such as transporting work materials that are difficult to reduce or change to transit. (OTOH, vacation travel probably uses more RVs and vans, and the traffic figures are vehicle-miles, not passenger-miles. Vacation travel should also get cut more quickly than commuting, which makes us less efficient in a passenger-mile sense, since road trips tend to have more passengers than commutes.)
 
The number you found is true for finished gasoline, aaron. However, if you look at the detailed numbers, you'll see that "conventional" gasoline consumption is down, but "reformulated" is up. So the increased mandates for ethanol and other reformulated and oxygenated gasoline play a role. Reformulated gas is less efficient per volume, so it does decrease efficiency measured per volume of finished gasoline. (But doesn't mean that it takes more crude oil input.) Cars *have* become more inefficient, in that they're using more inefficient fuel (per volume).

The EIA is a very valuable site for such things.
 
Definitely, been having lots of fun there today.

While relative efficiency of conventional/reformulated gas remains an issue, I'm quite sure that fuel consumption is down less than 1% (looks like below half a percent). The relative efficiency would need to be many times greater to explain difference. The percentage of reformulated is up a little for these month, but not significantly. Over the past several years it looks like it fluctuates between about 32.5% and 34.5%. For the October through March it has been:

34.19%
35.06%
33.74%
34.04%
36.43%
34.14%

While I doubt it is so big, this doesn't rule out the efficiency issue of the mix you mention. Anectotaly, my cousin decided to experiment with E85 when prices shot up. He quickly went back after the first tank, he got half the miles out of it.

I've come away from this even more confident that we are driving less efficiently with price pressures.
 
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