Why Is US Oil Consumption Lower? Better Gasoline Mileage?
Gail Tverberg | Feb 02, 2013 04:47AM ET
United States oil consumption in 2012 will be about 4.7 million barrels a day, or 20%, lower than it would have been, if the pre-2005 trend in oil consumption growth of 1.5% per year had continued. This drop in consumption is no doubt related to a rise in oil prices starting about 2004.
Figure 1. Comparison of Actual US Oil Consumption, with that that would have been expected if prior growth trend held. Actual based on EIA data.
Oil prices started rising rapidly in the 2004-2005 period (Figure 2, below). They reached a peak in 2008, then dipped in 2009. They are now again at a very high level.
Figure 2. US crude oil prices (based on average prices paid by US refiners for all grades of oil based on EIA data) converted to 2012 dollars using CPI-Urban data from the US Bureau of Labor Statistics.
Given the timing of the drop off in oil consumption, we would expect that most of the drop off would be the result of “demand destruction” as the result of high oil prices. In this post, we will see more specifically where this decline in consumption occurred.
A small part of the decline in oil consumption comes from improved gasoline mileage. My analysis indicates that about 7% of the reduction in oil use was due to better automobile mileage. The amount of savings related to improved gasoline mileage between 2004 and 2012 brought gasoline consumption down by about 347,000 barrels a day. The annual savings due to mileage improvements would be about one-eighth of this, or 43,000 barrels a day.
Apart from improved gasoline mileage, the vast majority of the savings seem to come from (1) continued shrinkage of US industrial activity, (2) a reduction in vehicle miles traveled, and (3) recessionary influences (likely related to high oil prices) on businesses, leading to job layoffs and less fuel use.
Gasoline Savings from Better MPG, Fewer Miles Traveled
Figure 3 below shows how the consumption of gasoline, distillate, and “All Other” oil products has changed since 1994. (Distillate is used mostly as diesel fuel, but some of it is used for industrial purposes, and some it is used for home heating.)
Get The News You Want
Figure 3. US Oil Products Consumption, based on EIA data. 2012 is based on partial year data.
Of the three product groupings shown, gasoline1 consumption is the flattest. Under “normal” circumstances, we would expect gasoline consumption to continue to rise, along with oil products in general, as shown in Figure 1 at the top of the post.
The amount of gasoline consumed reflects at least two different influences (1) the number of miles traveled, and (2) savings due to more fuel efficient cars. Based on gravel roads , if asphalt is increasingly unavailable, and concrete is too expensive.
Note:
[1] Gasoline as used in this analysis includes any ethanol that is blended in. This has been an increasing percentage over time, and now is typically 10% by volume. The addition of ethanol tends to keep mileage down because ethanol only gets about two-thirds as many miles per gallon as gasoline. I have not attempted to adjust for this. The mileage gain would be somewhat better, if ethanol had not been added to the gasoline. An increase in the ethanol blend to 15% have been approved. As this is phased in, it will also tend to depress mileage gains.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.