Tuesday, June 17, 2008


High Gas Prices Are Causing High Gas Prices

I've contended for a while now that high gas prices will lead to decreased efficiency.
It seems I've been right. I've been looking more closely at the data at the Energy Information Administration. I've found the appropriate data set (see Product Supplied, Finished Motor Gasoline).

The EIA defines product supplied as the appropriate measure for consumptions:
Products Supplied--Approximately represents consumption of petroleum products because it measures the disappearance of these products from primary sources, i.e., refineries, natural gas processing plants, blending plants, pipelines, and bulk terminals. In general, product supplied of each product in any given period is computed as follows: field production, plus refinery production, plus imports, plus unaccounted for crude oil, (plus net receipts when calculated on a PAD District basis), minus stock change, minus crude oil losses, minus refinery inputs, minus exports.
Gasoline consumption is down less than 1% (approximately 2/3 of one percent) compared to last year, while driving has been estimated to be down 4.3%.

This is a major decline in fuel efficiency. It cannot be explained by decreases in the most efficient types of driving alone. The driving cut would need to be several times more efficient than normal driving.

I’ve identified three reasons for the decline in efficiency I believe most likely(other than population growth combined with a lack of infrastructure growth):

3. Less efficient fuel mixtures (reformulated gasoline is making up a greater percentage of fuel).

2. Possible Giffen Behavior.
People are pressured to forgo luxury driving during off-peak hours, but must drive more during peak hours to produce a needed increase in income. And people are only willing to do so much driving in a day or week. People must drive more during congested times and are too tired to take the family out or take that country drive to visit grandma. Maybe mom and dad don't even want to be in a car any more.

1. Drivers acting on bad information (e.g. Accelerating slower rather than faster)

"It's not commonly understood by people who drive," Dr. Dougherty said. "They think that the way to get best fuel economy is to accelerate very gently, but that proves not to be the case. The best thing is to accelerate briskly and shift.

"Don't give it everything the car has, but push down when you're going to shift, using maybe two-thirds of the available power, and change through the gears relatively quickly."

It takes very little change in the average tank fill percentage to demostrate huge shifts in supply chain capacity. Maybe everyone is driving with a larger tankload.
Hmmm. It would require continuous increases in tankload to keep consumption up.
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