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
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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.

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Conclusion

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

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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
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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.