Gasoline is up, but driving is not down?
Students of the automotive energy-consumption (and thus emissions-production) problem know there are three legs to the solution: fuel source, vehicle design, and driver behavior. We can use fuels that are less carbon-intensive or more energy-efficient. We can change vehicle powertrains to more efficient designs, as in diesel ICE for highway driving and hybrids for around-town stop-and-go; we can alter tire rolling resistance and cut car weight. But the third leg is driver behavior: people can decide to take steps to use less energy in transportation. In the short run (as defined in the economics world, within a year) the main behavioral adjustment one can make is to just drive fewer miles, either by switching to public transport, or by dropping discretionary trips, or by "chaining" multiple errands together, or heck -- maybe by even walking somewhere. In the long run (defined as longer than a year) one might sell that gas-guzzler, or buy a used Honda Insight, or maybe even move out of the 'burbs into the city. One of the great things about the behavior-change leg of the tripod is that it can work very quickly: cutting back 500 miles a year across the 250 million vehicles on the road has a spectacular impact on energy consumption.. much larger than dribbling a few hundred thousand EVs or hybrids into the car stock each year.
But, to the consternation of all and the puzzlement of many, it ain't happening. VMT (vehicle miles traveled) seems to just march upward year after year, despite general consumer outrage and almost monthly announcements of new spot highs in the fuel price. Are people just not responding to the "price signal" the way they used to? Doesn't Economics 101 tell us if price goes up demand goes down?
Well, a few researchers at the University of California at Davis decided to take a cold hard methodologically-sound look at the problem, comparing short-run price elasticity of demand for gasoline as it existed in the period 1975-1980 and nowadays, in 2001-2006. (You can see the paper here. They picked these two periods because both saw very similar relative increases in the gasoline price.) The price elasticity of demand is just the percentage decline in the demand for something, in response to a 1% increase in its price. Thus a -0.5 elasticity figure means that if gasoline goes up 10%, we'll cut back our use by 5%. Professors Hughes, Knittel, and Sperling found that indeed, short-run price elasticity of demand has decreased over time, and sharply, from a range of about -0.20 to -0.35 in 1975 to 1980, to a range of about -0.03 to -0.08. That is an enormous decline, perhaps 80%, depending on how one averages the numbers. That means that if in 1977 (e.g.) the gasoline price rose by 50%, demand for it would drop by about 15% (over the short run); today the same hike would trim demand only about 2 or 3%. (In the long term, of course, more adjustment would still occur, as people bought more fuel-efficient vehicles, but the authors hypothesize that long-run elasticities have dropped as well.)
Why has this happened? The paper lays out a few hypotheses, from the increasing prevalence of urban sprawl (if you now live 20 miles further from work than you did 30 years ago, what choice do you have to cut back much on driving?), to rising incomes (maybe gasoline is a smaller part of the household budget today), or to -- ironically -- better fuel-economy performance in cars. (When gas doubles and you are driving a 6 MPG Olds Tornado you feel a lot more pain than if you're in a 35 MPG Civic.)
This is pretty bad news. Despite all the moaning about gasoline prices and all the pledges to "go green" in the public forum, in private it seems we're all still "Born to Run" (sorry, Bruce). However, one implication of all this, at least in our little corner of the world, is that the mission of AXP and other technology-forcing initiatives is becoming more crucial, not less. If people really are not in the mood to change behavior, then we're back to the other legs of the tripod (fuels and vehicles), which will have to pick up the slack. And AXP is all about innovation in fuels and cars. As the authors conclude in their final sentence: "... these results suggest that technologies and policies for improving vehicle fuel economy may be increasingly important in reducing US gasoline consumption." If you're going to floor it anyway, people, at least choose an AXP vehicle to do it in, and save some fuel in spite of yourself.
Feedburner