Tuesday, 10 May 2016

Vehicle miles travelled grow in the US, but not fuel consumption

Arthur Berman on the site oilprice.com reports on an interesting statistic indicating two key trends that should be of interest to transport policy makers in the US.

This figure indicates that vehicle miles travelled are at a record high.  For some time, green transport advocates have claimed that what they called "peak car" had been reached, implying that there had been a generational switch away from growing car trips and mileage:

Gasoline sales and Vehicle miles travelled

The claim was generally an assertion, whereby it was thought that younger generations preferred to use public transport, were more environmentally conscious and so the age of the private car was starting to wane.  This appeared to be an overly simplistic interpretation of data which seemed to reflect that with the economic slowdown associated with the so-called "Global Financial Crisis" (GFC) and high oil prices, that this reflected a cultural trend (one which may seem apparent in some relatively affluent urbanised centres like Berkeley, but which was much more questionable outside the geographic and cultural locations of those who made the claim).   That doesn't appear to hold true.

It would be simplistic to say that the drop in oil prices has helped promote demand, but Berman says that the relationship doesn't appear to be that direct, although it undoubtedly helped.

US gasoline sales related to prices
This graph indicates that as prices declined, demand did not respond immediately, no doubt because for many the cut in that price was a saving that could be used for other expenditure, not necessarily more transport.    Further analysis in the report indicates a lack of price sensitivity around demand for gasoline, but this appears to be a bigger issue when it looks like gasoline is increasingly a less important element in road transport costs.

For those of us in the world of funding and charging roads, the most interesting statistic is how the rise in vehicle miles travelled is not matched by fuel consumption.  There was a 3% increase in total vehicle mileage over a year in 2015, but a 2% increase in gasoline sales.  Does that mean that increased VMT are resulting in only a 50% increase in fuel consumption?  It may be too soon to conclude quite that, but there is definitely a declining correlation between fuel consumption and distance travelled.

Inflation adjusting fuel tax wont be enough

What this means is clear.  Even inflation adjustment of fuel tax wont be enough to offset ever declining yields.   Higher traffic levels don't necessarily mean proportionate increases in road maintenance costs, unless the increase is from heavy vehicles.  Around 40-60% of road maintenance costs may be fixed, and unrelated to traffic volumes, but increases in traffic do tend to mean increased capital spending on improving capacity at bottlenecks.   So continuing to use fuel taxes to recover road capital and maintenance costs is not going to be sustainable (and inflation adjustment is likely to only to delay the inevitable by a few years).

Alternatives will have to be found, unless it is deemed politically and economically desirable to simply keep increasing fuel tax, with the costs of road infrastructure falling on a reducing proportion of road users.  Taxation of vehicle ownership has its own limitations, as it imposes deadweight economic costs that distort wider economic activities.   The most economically advantageous approach would be to move towards charging for road use.

Some jurisdictions are using tolls as a way of achieving this, although tolls may be viable for major highways and crossings, they will not enable efficient charging of all roads.  Only charges based on distance or time will do this.

So it will be the likes of Oregon and California, pioneering such options in the US, that will be ahead of this. Charging by distance or time (and by time I mean actual time on the network, not so much prepaying like a vignette in Europe), with factors for vehicle size and weight, will far more accurately charge for road infrastructure costs than a proxy such as fuel consumption.  There is also more potential to charge varying by location, to reflect infrastructure costs and time to reflect congestion factors, but these are neither necessary, nor always desirable.

The issue of fuel use vs. road use is one of sustainable revenues at the moment, it is increasingly going to be an issue of equity, for it is difficult to see why the motorist who buys a Tesla and pays nothing to use the roads, should be subsidised by the low income motorist with a twenty year old 6-cylinder car.

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