Motor Trends: More Cars, More Miles, Less Usage per Mile (Jevons Paradox at work)

 “We cannot ignore the possibility that what we are experiencing is the Jevons paradox at work as more fuel-efficient new cars are encouraging drivers to use their vehicles more. The Jevons paradox means that as technology progresses, the increase in efficiency with which a resource is used tends to increase the rate of consumption of that resource.”

My post yesterday at MasterResource documented the boom in auto sales and the reasons why, both market and political (artificially low interest rates). Growing population, more cars. But what is happening with average fuel efficiency and with average miles driven per vehicle?

In its latest monthly Traffic Volume Trend report, the Federal Highway Administration documented an increase in vehicle miles traveled (VMT). The amount of car usage in June 2014 (the last available month) shows VMT at its highest level since 2007. For the first six months of 2014, VMT are the highest they have been since 2008, immediately before the outbreak of the financial crisis. That performance is also true for the moving 12-month total of VMT through June.

What we see when we examine the 12-month moving total chart that FHWA publishes each month is a small uptick carrying it to the highest point within a relatively flat trend that has existed, despite a certain amount of volatility, since 2009. While it is too early to make a definitive judgment about whether the VMT trend has changed and will now begin a steady upward climb, the possibility of such a change cannot be discounted. That could mean higher energy consumption in the future. Already, the sharply downward trend in gasoline sales has been halted if not reversed in 2014 to date.

Trend In VMT Showing New Life Source:  FHWA

Source:  FHWA

What is the significance of a new upward trend after so many years of an essentially flat VMT trend?

The conventional view lists a number of factors to explain the peak in VMT and its subsequent decline. Besides the financial crisis and subsequent recession, changing demographics impacting the primary driving age groups, living arrangements and lifestyles such as working from home and shopping online were part of their explanation. Millennials reportedly have different social attitudes about driving, car ownership and car usage.

In addition, shifts in residency patterns away from the suburbs and toward urban areas that provide a greater range of transportation options including hourly car rentals and smart phone options for summoning taxi and ride-sharing services further hurts driving. While we will need to monitor these trends, along with future monthly VMT totals, we cannot ignore the possibility that what we are experiencing is the Jevons paradox at work as more fuel-efficient new cars are encouraging drivers to use their vehicles more. The Jevons paradox means that as technology progresses, the increase in efficiency with which a resource is used tends to increase the rate of consumption of that resource.

While gasoline prices remain high by historical standards, they are lower now than in previous years, meaning that more fuel-efficient vehicles are experiencing even lower operating costs, thus encouraging drivers to drive more.  The latest statistics for vehicle fuel-efficiency from the University of Michigan’s Transportation Research Institute show that for the month of August, average fuel economy of new vehicles sold in the U.S. was 25.8 miles per gallon (mpg), up 0.2 mpg from July’s figure and the highest value since tracking began in October 2007.

Over this time period, vehicle fuel economy has increased by 5.7 mpg, a 28% increase, which goes a long way to offsetting the rise in average gasoline pump prices.

How significant are increasing vehicle sales and rising VMT on transportation-fuel sales? As the economy continues to improve and employment and incomes grow, gasoline sales can be expected to grow to erode some of the oil-import improvement that the nation has experienced over the past several years due to reinvigorated domestic oil production. Such may play into the debate over lifting the oil-export ban, not to mention energy conservation policy.