U.S. Demand For Gasoline Has Peaked

As improbable as it sounds, the U.S. hit 'peak gas demand' in 2006 at 9 million barrels per day. By 2030, experts predict it will be 20% lower. The decline is attributed to driving less, more efficient vehicles, and the addition of ethanol to gas.

Current gas consumption is 8 MBD, excluding the ethanol addition. While the current recession is one reason for Americans driving less - don't expect demand to increase when the economy improves. Unlike traditional times when prices fell with demand, the world's developing economies will make up for the drop in sales to developed nations, and then some.

"But while fuel consumption has rebounded in the past, experts says this time it's different: demand has dropped for good."

"A combination of demographic change and policy change means the heady days of gasoline growing in the U.S. are over," says Daniel Yergin, chairman of IHS Cambridge Energy Research Associates."

But the experts have proven wrong before.

From AP: US gas demand should fall for good after '06 peak: "Sometimes what we think is a structural shift is really just a temporary phase," says Antoine Halff, an analyst at the brokerage firm Newedge. "U.S. demand has rebounded with a vengeance before."

Thanks to Gladwyn d'Souza

Full Story: U.S. gas demand should fall for good after '06 peak

Comments

Comments

Irvin Dawid's picture
Correspondent

Six Reasons Cited By Expert For Gas Demand Decline

Note that all articles on the is topic are based on the AP article by Jonathan Fahey. USA Today captured an interesting part of the report:
"(AP reporter) Fahey quotes one energy expert as predicting that by 2030, America will use just 5.4 million barrels a day, the same as in 1969.
1. Higher fuel economy standards for U.S. cars, beginning with the 2012 model.
2. A steady dropoff in commuting distances plus less driving from aging baby boomers.
3. The shift toward more cars running partially or entirely on electricity.
4. Higher gasoline prices as developing countries in Asia and the Middle East begin to use more oil.
5. The increased use of biofuels in gasoline.
6. A shift from SUVs beginning in 2004 that has saved America $15 billion on gasoline this year."

Irvin Dawid, Palo Alto, CA

Michael Lewyn's picture
Blogger

Overlooks Jevons Paradox

The argument that increased fuel efficiency will reduce fuel consumption overlooks the Jevons Paradox

http://www.eoearth.org/article/Jevons_paradox

Limit of Jevon's Paradox

Jevons Paradox applies only if demand is relatively elastic, as demand for coal was when Jevons wrote. Wikipedia has a couple of graphs showing why it does not apply if demand is inelastic: http://en.wikipedia.org/wiki/Jevons_paradox

In the United States, elasticity of demand for gasoline is only about 0.2 (if I remember correctly) so Jevons Paradox would not apply.

Eg, if we doubled fuel efficiency of the entire fleet, Americans would drive 20% more. Doubled fuel efficiency would not cut gas consumption by 50%, but it would cut consumption by 40%.

Charles Siegel

Irvin Dawid's picture
Correspondent

Does Jevons Paradox disprove forecasts of declining gas consumpt

First, Michael, thanks so much for bringing up Jevons Pradox - discussed on Planetizen several times, and on Dec. 20, the topic of a lengthy article by New Yorker writer David Owen: The Efficiency Dilemma: If our machines use less energy, will we just use them more?.

Note that the abstract only is available on-line - I'm just getting started on reading this long essay. Owen, whom I have the utmost respect for having purchased Green Metropolis, writes that "the first fuel economy regulations for U.S. cars were followed NOT by a steady decline in total U.S. motor-fuel consumption but by a long-term rise" and goes on to suggest some (but not all) reasons for it. He writes, "...(economists) have said that efforts to improve energy efficiency can more than negate any environmental gains...."

While still reading the article, I'm wondering how Owen would respond to these latest projections. I do think Jevons applied in the past....I'm not so sure now...to fuel consumption, that is. There are so many factors now contributing to lowering U.S. demand and consumption - they may easily overwhelm the 'rebound effect' (another term for the paradox).

Irvin Dawid, Palo Alto, CA

Michael Lewyn's picture
Blogger

a countervailing factor

Even leaving aside Jevons, one factor favoring increased gas consumption will be reduced transit ridership, as government support for public transit at every level is reduced: at the state and local levels because of recession-induced revenue collapses, and at the federal level because of the federal deficit and perhaps ideological hostility in Congress.

Fuel Economy and Fuel Consumption

"the first fuel economy regulations for U.S. cars were followed NOT by a steady decline in total U.S. motor-fuel consumption but by a long-term rise"

Per Capita VMT in the US rose quite steadily from 1950 through 1990. It did not start rising more rapidly after fuel economy regulations went into effect. I think this is because other factors, such as our zoning laws and the amount of money we put into building freeways, do far more to influence VMT than gasoline price does. The other factors overwhelmed the rebound effect back then, just as they do now.

Irv, look at the graphs in http://en.wikipedia.org/wiki/Jevons_paradox and then look up the elasticity of demand for gasoline, and you will see that the economics is very clear: Jevons paradox does not apply.

Some environmentalists like to cite Jevons paradox because it is an argument for more radical change: they want to build more livable cities rather than just to increase fuel economy, and so they claim that increasing fuel economy does not work at all.

As you know, I also want to build more livable cities and think this is far more important than fuel economy, but I don't think we can argue for this position effectively by denying reality and claiming that increasing fuel economy doesn't work at all.

Charles Siegel

Peak Paradox.

I agree with Charles' elasticity point. One other thing to consider is what happened to VMT when gas prices went up. When the days of cheap energy are gone, prices will rise permanently and people will reduce their icVMT (internal combustion VMT). Will they migrate to places with a shorter live-work gap, accessible transit, etc? Some will.

Best,

D

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