Oil Prices Finally Changing Consumer Behavior

More evidence of significant changes in the behavior of American consumers.

 

U.S. vehicle miles traveled in billions of miles, 12-month moving average. Source: Federal Highway Administration.

Bloomberg reports:

 U.S. motorists drove less for a seventh consecutive month in May, as vehicle-miles traveled on all U.S. roads fell 3.7 percent during the month from a year earlier, the Federal Highway Administration said in a report yesterday. The seven-month slide is the longest downward streak since 1979.

Demand for oil and petroleum products dropped 4.3 percent in May from a year earlier to 19.7 million barrels a day, according to Energy Department data released yesterday. That's 889,000 barrels a day less on average for the first five months of the year, compared with the same period a year before.

U.S. monthly total crude oil and petroleum products supplied (in million barrels per day) Data source: EIA.

U.S. gasoline demand appeared to be quite unresponsive to price during 2001-2006. My interpretation is that the primary reason we ignored $3.00 gasoline is because we could afford to. But as gas prices rose and the number of gallons purchased held steady, the budget share for energy has gone up pretty dramatically over the last year. Fewer people seem to be ignoring $4.00. 

U.S. average retail gasoline price. Source: NewJerseyGasPrices.com.

Comments

[fireball:]

JAMES i am not sure of your point. are you a greenie going hooray the earth is saved? because there are plenty of consumers out there to take up the demand slack. a few million of tatas tin cans will easily burn what we do not. i do not think epa standards are the first concern in the developing world. they cannot afford that luxury for quite some time. are you taking note of the destruction to our economy? it is certainly having a negative impact and adding to the spiralling problems we have. more lost jobs, more forclosures, worsening bank positions........i think alternatives are great if they can stand on their own without subsidies but they can only have a minor impact for years. i am sure all those u.n. advocates of the kyoto treaty will gladly use the oil that we do not. that treaty was a joke anyway. it appeared that the u.s. would be required to meet all these standards while everyone else continued to make a mess of things. that is simplified but still captures the gist of what it was about. it is costing us to much to be happy about a little less oil being used.

2008 Jul 30 09:38 AM

[rickh:]

Fireball.

Should oil be required to stand on it's own without subsidies?

2008 Jul 30 09:56 AM

[fireball:]

RICKH YES

2008 Jul 30 11:14 AM

[Paul Killinger:]

Yeah, oil prices are changing consumer behavior alright. Of course, this is only the harbinger of the coming U.S. economic DEPRESSION.
Doubt that? Okay, look at your "miles driven" chart again and tell me it doesn't mirror our ENTIRE ECONOMY.

2008 Jul 30 11:31 AM

[Paul Killinger:]

Alright, I'll bite. Exactly what "subsidies" do oil companies get that aren't available to other types of mining and manufacturing activites in the tax code? Last I checked, they're paying record taxes, excessive lease rates, and exorbitant royalties. And, unlike the airlines, auto companies, banks, brokerages, homeowners, et al, no one was talking about bailing them out when they were going broke.

2008 Jul 30 11:42 AM

[fireball:]

PAUL8756 hi bud. RICKH, let me try quickly to explain. right now is probably not the time to jerk the rug out from under oil just as it is not the time to take it out from solar. we already let them get addicted. the weaning process should begin as soon as possible. i will use medical care as an easy example. when i was a kid a doctor would come to your house if needed even in the evening. it was still competitive. best service, cheapest price, then the socialization of medicine and insurance began. the result, look at healthcare costs and insurance costs. government cannot in the long run help unless the end result you desire is a socialist state. as far as i can tell they are to stay out of the affairs of business except to step on monopolies and to intervene if some company is poisoning everyone that is downstream or to make sure some drug is not going to kill you after it makes you feel better for a few days. consider, war on poverty more poverty at great cost to the productive, war on drugs, more drugs at great cost to the bill of rights. real war is what they are supposed to make constitutionally and when not handicapped by u.n. idiocy our military is quite effective. the tennessee state government has imposed a microversion of hillarys nationalized healthcare and it is bankrupting the state. the abuses are rampant. so i know this is simplified and short but i am pressed for time today. in short anytime government says i am here to help grab your loved ones and your wallet and take cover. some may say what about the really big projects like the space program. i consider that as part of our national defense, especially when it began. i still see it as legitimte function and it has generated wealth not just for us but it has trickled down through the world economy. i notice barney frank is trying to stop the mars efforts because he needs that money for buying votes through handouts. when i was a kid welfare was a shame to the recipient. do you like the prospects for socialist security? welfare is still a shame it is just after generations of living like a parasite many now regard it as a right. i do believe in my heart that a return to constitutional government would quickly set our country back on a course of prosperity. there is no such thing as a free lunch. someone has to pay. to many this will seem naive and simplified. i see the proper course as simple. the complications arise because government got involved in the first place. i think a metal backed currency makes more sense every day as events unfold. i am sorry to respond and run but i am forced to try to earn more fiat currency to buy inflated gas and food. i am only semi-retired.

2008 Jul 30 12:13 PM

[fireball:]

RICKH paul raises a great point. i do not believe in punitive taxation to the successful either. sorry got to run.

2008 Jul 30 12:16 PM

[petervankan:]

IMHO people are doing now what they should have done decades ago. Apparently they can do without all those miles.
The reason why the US is not participating in the Kyoto treaty and the Eu is, as far as I can see is this: there are to many people totaly focussud on the conomy in the US, so politicians have very little rom to move. If they wanted to move in the first place, which is doubtful.
As for INdia taking over the miles not driven: let's face it, we in the EU and the US have for decades been obcneley wealthy and wasteful. And now we should continue destrying this planet because we can't allow India or China to have an advantage ? How penny wise is that ? You guys donlt have children ?
As for socialism: I live in Holland. Better social laws, better health coverage, more liberal laws on drugs with infinite better results, fewer people in prison, less cime, better environment laws, better economy.
Don't get me wrong, I love the US. And IMO its only chance of not going down the drain in all ways is called Obama. Oil is over, better be among the first to make the transfer.

2008 Jul 30 01:46 PM

[CaptBob:]

Today the world produced 85 million barrels of oil, tomorrow it will be less.
Today the world consumed 87 million barrels of oil. Where did the 2 million come from?? Reserves I guess, if so there's 2 million fewer reserves for tomorrow.

We're consuming less--very recently--in America. We've finally reached our price plateau, apparently above $4--(for the masses/average). Europe pays $6-$8 but has an offset with a strong Euro vs the dollar.

The Asians have just started a consumer spike in Oil. They don't have to drive cars, since they outnumber us 10-1, just motorizing their bicycles will do very nicely, thank you.

Everything else you read is just short term fluff and wishes.
Tomorrow there will be less than enough, that's all you need to know. If you don't replace it with something else your standard of living is going down.

Even a Politician ought to be able to connect those dots.

It's the end of July and you don't have to drive today--good, you conserved--now spend that money insulating your house or tell your favorite bar to put in Lazy Boys for January--you gotta sleep warm sometime. The choice to save on oil then is going to prove a chilly proposition.

Remember when Movie theaters had big signs outside in the Summertime with icicles hanging off them, saying cool inside-A/C!!.
Maybe next winter it'll be flames and "warm inside" HEAT!!

2008 Jul 30 02:04 PM

[kebu77:]

When there is a change in a trend, 12-mo. data will understate the magnitude of the change.

Looking at the actual monthly FHA data, the change in driving behavoir actually begins around 2003. (For May, April and March 2008, you have to go back to 2003 to see lower miles driven.)

While your graph shows 2008 dropping down to the 2005 level, when you look at the individual month data, 2008 has actually dropped down to 2003 levels - - a big change from the multi-decade rising trend.

2008 Jul 30 04:56 PM

[ozzy43:]

petervankan: And El Al never gets hijacked. But their tactics would not work for US airlines. Why? Because of the scale. Holland is not America - it's vastly less populous, and vastly less heterogeneous.

Anyone who wants to buy into the social model made famous primarily by the Scandinavian countries should first read:

www.timbro.se/bokhande...

'Better' is a highly subjective word - Holland's residents pay for their 'better' laws by accepting less liberty, vastly higher taxation, etc. Fine by me, but please don't presume that the tradeoffs you find acceptable are right or will work for every country in the world. I would welcome an end to the calamitous war on drugs here, and I would welcome an end to the misbegotten war on Iraq, among innumerable other 'wars' we declare on everything from illiteracy to teen pregnancy, but as for more State control - you can keep it, thanks very much. The State here has proven unworthy of that sort of trust - no matter who has held office. And in fact the greater the power of the State in a militarized nation like the US - UNlike Holland - the greater the probability that the military will be used to advance political agendas. Again, no thanks. Vast State empowerment is what got us into this mess in the first place, compliments of some other US presidents you probably think highly of: FDR, Truman and LBJ.

2008 Jul 30 05:26 PM

[fireball:]

CAPTBOB i am not sure if you were replying to me. i agree with what you said. i know that alternatives can only make a small dent in the problem just as each new oil field can only nake a small dent but put them all together and maybe it will begin to help some. i am pretty well diversified and i would rather loose a little money on my oil stocks than see this spiral into depression? at the least recession accelerate. even if i thought (i do wonder at times) that resistance is futile i would still believe we should try. maybe that is a bit of a candide approach but i need to stay optimistic. PETERVANKAN sorry buddy. keep your socialism. i would think europe would have learned by now. i think a little german with a funny mustache taught a pretty hard lesson. obama should be running for office in one of your little socialist eutopias. to all appearances the u.s. should have just focused on kicking the crap out of japan and let germany have europe. it seems now in the long term it was wasted american life and effort. i do not really believe that we should not have fought because there was more at stake than europe. in the 80s i worked with a dutch fellow. every day he would bitch about our nukes in holland and the u.s. bases in europe. finally one morning i said ,i agree, protecting your little country is costing us millions. we should just let the russians have it. holland is nothing to us other than one more headache. i was being sarcastic but as things have turned out you adopted that philosophy anyway. communism is a term marx coined for his manifesto because europe at that time was so fed up with socialists. fascism is just one more variation of socialism. peter you know ism implies a belief or system that is already defective. sorry buddy i do not mean to offend you but i just want to help you understand that socialism is the great failed experiment.

2008 Jul 31 11:30 AM