Friday, August 28, 2015

Lower Fuel Prices, More Driving Miles

With U.S. fuel prices down by 1/3 since last year, you would guess that people were driving more, and we are, but not a lot more. Total vehicle miles as estimated by the U.S. Department of Transportation are up about 4 percent from the year before. That is enough to set an all-time record for the country, as population growth adds to the slight increase in individual driving.

The increase of 4 percent is barely enough to create an increase in the total amount of motor fuel sold. The countertrend of increasing fuel efficiency, which includes electric, natural gas, and hydrogen vehicles is probably enough to cancel out the increased driving distance in the long run. The replacement cycle for vehicles is also part of the fuel efficiency trend. When vehicles from the 1990s are retired and replaced with new vehicles based on current designs, fuel efficiency goes up. Of course, if the quantity of fuel is about the same, that means the revenue from fuel has declined by about a third from last year.