Summer driving season is over but the results are clear: 2015 saw a record spike in demand for both driving and gasoline. Demand for motor gasoline and vehicle miles traveled (VMT) are at or near record highs, and have both seen the largest year-over-year spikes in history. Meanwhile, the steady improvements in sales-weighted fuel economy that the country has seen since 2007 have completely flatlined.
Demand for motor gasoline and vehicle miles traveled (VMT) are at or near record highs, and have both seen the largest year-over-year spikes in history.
A rebound in economic activity is partially to blame, and the Energy Information Administration (EIA) is pointing toward job growth and automotive sales trends as major drivers of the surge. But the latter, as well as the increase in VMT, is a direct result of low gasoline prices. This summer’s demand spike reflects the fact that Americans remain responsive to fluctuations in fuel costs, and that the so-called peak in driving and gasoline demand that analysts pointed to during the past five years was a result of high oil prices and slow economic growth rather than a structural change in U.S. driving patterns.
Vehicle miles traveled, after rising inexorably since the 1970s, saw their first meaningful decline in the wake of the 2008 financial crisis. In 2012, VMT dropped to a ten-year low, reversing the record highs observed from 2005 to 2007. This drop-off in travel contributed to a perception among analysts that U.S. demand had plateaued permanently, and the country had already witnessed “peak mobility.” Popular explanations included the aging population, slowdown in suburbanization, increasing reliance on communications technology, declining interest in driving from millennials, and other structural shifts in American consumption habits.
VMT reached a new record high this summer, even though data is only available through June. The charts below show the dramatic nature of the increase—VMT rose at roughly two percent per year in the decades before the financial crisis, but 2015 travel increased by over four percent over 2014.
Motor Gasoline Demand
Of course, all that driving has had a measurable impact on gasoline demand. Gasoline consumption averaged 9.5 million barrels per day (bpd) during August, according to the EIA, the highest seasonal level since 2007. The good news is that gasoline demand remains below the record highs set in 2007—although only marginally. The bad news is that last year’s increase, like VMT, was the single largest year-over-year jump in recent history, with an increase of five percent.
Improving the efficiency of the country’s automotive fleet takes time, and it’s not enough for automakers to offer more fuel efficient cars—consumers have to buy them
So while VMT is at an all-time high, motor gasoline demand is just shy of the record set in 2007. This is likely an outcome of improved vehicle efficiency thanks to fuel economy standards. The requirement that automakers improve sales-weighted fuel economy to 54.5 miles per gallon by 2025 set off a race among car manufacturers to create and sell more efficient offerings through more sophisticated engines, vehicle light-weighting, improved aerodynamics, etc. But improving the efficiency of the country’s automotive fleet takes time, and it’s not enough for automakers to offer more fuel efficient cars—consumers have to buy them. From 2008 through mid-2014 when oil prices were around $100 per barrel and gasoline was well above $3.00 per gallon, this issue wasn’t a problem, and sales weighted fuel economy steadily improved from 20 mpg to 25 mpg as motorists sought to save money at the pump. Now that consumers perceive that gasoline is inexpensive, they are flooding back to inefficient vehicles, and sales weighted fuel economy has completely flatlined since Q3 2014.
According to Wards Auto, car sales were up by 2.7 percent in August compared with last year, but light truck sales surged 5.5 percent. EIA recently documented that, “from January through August of 2015, sales of light-duty trucks—pickup trucks, sport utility vehicles, and vans—outpaced those of passenger cars by a seasonally adjusted 28 percent, the highest difference on record.” The agency also noted that light-duty truck sales, on an absolute basis, have been increasing steadily since 2009 and, from January to August 2015, reached a new record of 9.57 million vehicles sold.
With VMT and sales of light duty trucks at their highest points in history, the U.S. could soon be setting new records for gasoline consumption, and “peak demand” will be even further away.