US Fuel Consumption - PowerPoint PPT Presentation

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US Fuel Consumption

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People pay less $/mile (holding gas prices constant) HOWEVER... Unresolved consequence extremely high fuel prices degrades economic performance ... – PowerPoint PPT presentation

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Title: US Fuel Consumption


1
US Fuel Consumption
  • October 6 2005
  • Myke Komarnitsky

2
CAFE Standards
Source http//www.fueleconomy.gov/feg/FEG2000.htm
  • Force fuel efficiency compliance

Unchanged under Bush Sr., Clinton, Bush Jr.
3
SUV Market Share
4
  • Once in compliance, efficiency does not go any
    higher. Meanwhile, power goes up a lot

HP/100 pounds
Time of big increase in actual fleet MPG
1985-200343 increase
5
Impact on US fuel consumption from rising CAFE
fuel regulations
  • New cars consume less fuel/mile thus
  • People pay less /mile (holding gas prices
    constant) HOWEVER
  • Miles driven increases when /mile decreases
  • Key question By How Much?

6
Price Elasticity of Demand
  • Ed DQ/DP DQ EdDP
  • (Q2-Q1)/Q1Ed (P2-P1)/P1
  • Q2 Q1 (Ed (P2-P1)/P1) Q1
  • Example with Gas

Goods Demand Elasticity
Gasoline, short-run 0.2
Gasoline, long-run 0.7
Source Mackinac Center for Public Policy
7
Price Elasticity of Demand
  • Sources
  • Consumer demand in the United States, 1929-1970
    analyses and projectionsHS Houthakker, LD Taylor
    - 1966 - Cambridge Harvard University Press
  • Economics Private and Public Choice, James D.
    Gwartney and Richard L. Stroup, 8th edition 1997.

8
Conclusion
  • For a 10 increase in MPG
  • Miles increase by 9
  • Total fuel use decreases by 6.36
  • Real Life Savings

9
So What?
  • US Gas Consumption 20.4M bbl/day
  • Automobiles 9.0M bbl/day (44)
  • ANWR
  • 1.00-1.35M bbl/day, attained 2030-2040
  • 20 increase in CAFE standards
  • 500K bbl/day, attained 2025
  • Investment Costs to Attain
  • ANWR Significant capital, operational costs
  • CAFE increase technology already in use (limited
    production), but primary cost is customer
    enjoyment from HP sacrifices

Source http//www.eia.doe.gov/emeu/cabs/usa.html
10
Final Thoughts
  • Americas rising demand is outstripping supply
  • Unresolved consequence extremely high fuel
    prices degrades economic performance
  • Solution
  • Drill ANWR
  • Immediately increase CAFE fuel standards, but by
    a moderate amount to minimize capital investment
    shocks for automobile manufacturers
  • To just drill ANWR is irresponsible.
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