Why is US Oil Consumption Lower? Better Gasoline Mileage?

United States oil consumption in 2012 will be about 4.7 million barrels a day, or 20%, lower than it would have been, if the pre-2005 trend in oil consumption growth of 1.5% per year had continued. This drop in consumption is no doubt related to a rise in oil prices starting about 2004.

Figure 1. Comparison of Actual US Oil Consumption, with that that would have been expected if prior growth trend held. Actual based on EIA data.

Figure 1. Comparison of Actual US Oil Consumption, with that that would have been expected if prior growth trend held. Actual based on EIA data.

Oil prices started rising rapidly in the 2004-2005 period (Figure 2, below). They reached a peak in 2008, then dipped in 2009. They are now again at a very high level.

Figure 2. US crude oil prices  (based on average prices paid by US refiners for all grades of oil based on EIA data) converted to 2012$ using CPI-Urban data from the US Bureau of Labor Statistics.

Figure 2. US crude oil prices (based on average prices paid by US refiners for all grades of oil based on EIA data) converted to 2012$ using CPI-Urban data from the US Bureau of Labor Statistics.

Given the timing of the drop off in oil consumption, we would expect that most of the drop off would be the result of “demand destruction” as the result of high oil prices. In this post, we will see more specifically where this decline in consumption occurred.

A small part of the decline in oil consumption comes from improved gasoline mileage. My analysis incidates that about 7% of the reduction in oil use was due to better automobile mileage. The amount of savings related to improved gasoline mileage between 2004 and 2012 brought gasoline consumption down by about 347,000 barrels a day. The annual savings due to mileage improvements would be about one-eighth of this, or 43,000 barrels a day.

Apart from improved gasoline mileage, the vast majority of the savings seem to come from (1) continued shrinkage of US industrial activity, (2) a reduction in vehicle miles traveled, and (3) recessionary influences (likely related to high oil prices) on businesses, leading to job layoffs and less fuel use.
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