The production of oil and gas in the U.S. is near all-time highs while the consumption of fuel has shown an unprecedented decline since 2003.
White House chief economic adviser, Jason Furman, sent the following tweet on the 19th of June, “Surprise fall in oil consump since 2003 is ~ 2x larger than production incr; consump < every forecast from last decade”
Interestingly, there is no one standout reason for this trend in lower fuel consumption, but rather a combination of factors which are collectively responsible for the size of the decrease in fuel usage.
The green revolution, which has made both governments and consumers increasingly aware of the dangers to our planet from the excessive use of carbon fuels, has brought about several changes.
According to Furman the rising standards with regard to fuel exhaust emissions and the subsequent fuel savings have had a large impact. A greater green awareness amongst consumers has made more fuel efficient vehicles, such as the Toyota Prius, increasingly popular. Added to this, Americans no longer have to buy as much gasoline to travel the same distances as before.
American driving habits and gasoline consumption have been changing as a result of a number of so called oil shocks dating back to the 1970s.
The first oil shock, which came in the 1970s, was the oil embargo imposed by the Arab oil producers to punish the U.S. and other NATO countries for supporting Israel during the 1973 Yom Kippur War. By the time the embargo ended in 1974, the oil price had gone up by about 25%.
The second oil shock came in the wake of the 1978/1979 Iranian revolution and the resultant decreased oil production. Oil prices more than doubled between April 1979 and April 1980 according to Laurel Graefe of the Federal Reserve Bank of Atlanta. The resultant monetary policies introduced by then Fed Chairman Paul Volcker resulted in a cooling of the U.S. economy and a steady drop in oil demand, while the price starting falling from the mid 1980s and lasted for the next 20 years.
The recession, which started in 2008 and resulted in millions of Americans losing their jobs, was another game changer in driving habits and the type of auto purchased. The simultaneous increase in oil prices also had a large effect on the fuel saving trend that was developing amongst consumers.
The figures that follow speak for themselves; the number of registered motor vehicles decreased by an unprecedented number between 2008 and 2012. The registration in the U.S. of motor vehicles, excluding motorcycles, fell by almost 19% from 137.1 million to 111.3 million. In tandem with this, the total amount of fuel used was 3.7% lower in 2013 than it was in 2007. While this is not a high figure percentage wise, an actual total of 7 billion gallons of gasoline less was used.
The introduction of fuel efficient vehicles, electric vehicles, periodic high oil prices and job losses have all played a part in driving habits and preferences changing. The aftermath of the 2008 or Great Recession is still very much with us and will probably still be felt for many years to come.