After almost three decades of stagnancy US fuel economy is finally on the move. Its actually quite something. Fuel consumed peaked in 2004, miles driven in 2006 and vehicle numbers topped out in 2008. Could motorization in the US have peaked? That’s a tough one, but driving emissions may well have.
What we do know is that the last time we saw this type of improvement was when the Iranian Revolution resulted in 4.5 million barrels of missing production. In the image above we can see that fuel economy was stagnant for decades as all engineering improvements were eroded by American’s buying bigger and bigger cars.
So what’s has finally changed? Was it the recession? It may have played a part, but it certainly isn’t the whole story. First let’s unpack that headline. A 22% reduction in emissions in six and half years is quite something.
Eco Driving Arrives in America
The University of Michigan does some epic number crunching on US fuel economy which they keep in the form of the Eco Driving Index. The total EDI for vehicle emissions tells use that an American driver of a new car in March 2014 generated 22% fewer emissions that a similar new driver in October 2007.
Happily the index is comprised of two sub indexes, allowing us to separate the effect of changes in distance driven and fuel used. From this we can see that the big change is improving fuel economy, with new cars requiring 19% less fuel to cover the same distance as in 2007. Distance driven is off 4%.
Below is a chart the sharp rise in fuel economy of new cars (adjusted to window sticker ratings).
So what happened? Given that the economy is up significantly since the crisis and mileage only down 4% its tough to say how big a part the recession had. It could have helped to skew purchases towards more economic cars, but I prefer the following two explanations.
Obama’s Quiet CAFE Revolution
Everyone knows the EPA under Obama has been grinding up the corporate average fuel economy (CAFE) standards. It’s not got the column inches of the power regulation proposals of late, but the effect will be profound.
Here’s a chart showing the ramp up:
The Third Oil Crisis
Okay, no one actually calls it this. Krugman jumped the gun in 2002. But we were so busy with global financial crisis a few years back that no one bothered to get excited about it rising oil prices.
Just indulge me a little. Look at this chart:
The 11% decline in US oil consumption from 2005-2012 does not match the 19% drop from 1978-83, but it dwarfs anything else in the last 40 years. This graph actually looks like it’s straight out of Econ 101. Stick the price up, we’ll consume less.
So there you go. Three potential ideas for why American’s are finally finding their love of fuel economy.
What do you think? Anything else going here?