Strategic Forecasting, Inc. --------------------------- U.S.: A RECORD-SETTING CHANGE IN DRIVING HABITS Summary The number of miles driven by Americans dropped 4.3 percent year-on-year in March, according to the U.S. Department of Transportation. The decline -- the sharpest ever -- represents a behavioral change that is a necessary precursor to a shift in the markets. Analysis Car-loving Americans drove 11 billion fewer miles in March than they did a year earlier, the U.S. Department of Transportation reported May 23. The 4.3 percent decline is the first year-on-year decline since the 1979 oil shock, and the sharpest decline ever. While Americans typically think of themselves as pressed for funds, in fact they have the most disposable income per capita of any of the major developed states. Adjusted for inflation, the average American's disposable income has increased by more than $10,000 since the 1979 oil shock as estimated by the Bureau for Economic Analysis. There are more than 300 million Americans, and the sheer size of their collective purchasing power is simply mammoth. Thus, Americans can rather painlessly absorb nearly any price increase for basic goods. But apparently there is a level at which they begin to adjust their behavior. Oil prices are now above $130 a barrel, twice what they were a year ago, and gasoline prices averaged $3.79 this week. Whether the decline in miles driven is happening because of high oil prices or slower economic growth -- or more likely a combination of the two -- is irrelevant. The point is that it is happening and that will have results. The current economic situation is changing driving and spending habits on a long-term basis. For example, wretched sales of trucks and sport utility vehicles have a counterpoint in phenomenal sales of hybrid vehicles. These shifts to a more energy-efficient lifestyle are factors that will shape oil demand for a decade, and permanently reduce the demand of a culture that has traditionally been the oil producers' best customer. This is not to say that the May 23 statistical release will become known as the turning point in the market, but never forget that the United States uses more oil in absolute and per capita terms than any other country in the world. Without a shift in American behavior, it is difficult to see how the markets could ever undergo a fundamental drop. With that shift, it is difficult to see how -- given time -- they cannot. Copyright 2008 Strategic Forecasting, Inc.
What I've noticed is that people are driving much slower, and accelerating more slowly from the stops. So much so that when people drive like most people used to, they really stand out, and you know their office or Mom and Dad are paying for the gas! I usually out-accelerate most drivers now.
The thing that may really be a shocker for most, is that driving a hybrid is so much more enjoyable than what is being left on the lots. On the last embargo, the small car was a step down. Now the Prius is a step up. Any new Prius Owners out there who got a Prius only expecting good MPG but nothing else?
I've done the same thing in the S-10. Shifting at 2k RPM's and not going over 65 on the highway. It worked last week because I just got 19.5 MPG in this thing. That's a 9 year old truck with 110,000 miles on it and I beat the rating by 4.5 MPG.
An improvement is an improvement and considering our disagreements in every other area regarding the sciences and environment I commend you on your attempt to do the best you can. Even if you don't agree with me on the environmental and societal impacts, you are still working towards reducing that negative impact (which we all contribute to) and that helps me and everyone else around us. Thank you.
If those are the March figures, then I can't wait to see the May figures!!!! People began slowing down in March. In May, everyone was driving even slower. Best of all .. the tailgaters have subsided. Back in March, tailgaters got upset. Today, people don't get upset anymore, and in fact, I see a lot more people on the road driving the same way that I'm driving. (I've previously reported that I have never had problems with tailgaters because I drive in the right lane, and people just go around me ... until recently. Most people just go with my flow now and don't complain) BUT, with supply and demand ... (this article cites a 4.3% drop in consumption) less demand means the prices should be going down! But that is not the case. Yes, I am fully aware that oil prices have become a hedge against inflation by investors and an "irrational exhuberance" bet that there will be fuel shortages in the future. BUT, it will be very interesting to see how this 4.3% drop report affects the oil markets.
They (OPEC) will simply cut production based off demand. So if thre is a lower demand they drop production to keep raking in billions of dollars.
It's important that we all do our best to get the best mileage out of our vehicles, no matter how much they guzzle. You're doing that and that's always good. My last American car was a 2002 Chevy Blazer which is the SUV brother to the S-10 and no matter how I drove and no matter how hard I tried, I always got 19 mpg. I could drive it like the myriad impatient jerks around the Detroit area or I could drive like the best Prius hyper-miler and I still got 19 mpg. That's why I'm hooked on hybrids because I can always set a goal to improve mileage and the vehicle responds. Currently, I'm getting around 35 with my HiHy.
Decreasing demand doesn't guarantee that prices will go down. It just means that prices aren't as high as they otherwise would be.
Doc, What is not mentioned in this report is the decline of housing values which seems to be having a major dent in the U.S. consumers' buying power. (IE: pulling out home equity is rapidly diminishing). So. many consumers are stuck in trying to maintain their overextended lifestyles. Also many are way over their heads with credit cards maxed out to the limit. Dbcassidy
OPEC hasn't been a functioning cartel for a long time now. There's enough non-OPEC oil production out there to convince its members to cheat even if they weren't cheating before the cartel decided to reduce production. And there are indications they're already ignoring their quotas by fudging their reserves to arrive at a quota that allows them to produce as much oil as they desire. The reason they always say production is sufficient is because they can't produce anymore but just don't want to admit it. At $135/barrel, everyone who can produce oil is producing as much as they can. Production can really only increase in the short term if the few areas with political instability or poor infrastructure solve those problems and get to 100% capacity. Econbrowser: OPEC production quotas
