US driving and demand destruction

The IEA’s report today paid special attention to the subject of reduced demand for oil from US drivers.

As well as observing that the US driving season failed to materialise again this year (which could be put down to suppression – ie. a temporary decline), it dedicated a special feature to the country’s recent moves towards increasing vehicle efficiency – which indicate demand destruction.

The EIA chart to the right shows, demand for liquid fuels fell substantially last year, and  gasoline demand is not expected to return to growth until 2010, despite this year’s lower prices.

The IEA noted the scrappage scheme, but also:

  • The decision to allow California the right to regulate fuel efficiency and carbon emissions from vehicles – another 13 states, plus the District of Columbia, are expected to follow suit
  • Support for natural gas vehicles by several lawmakers
  • A shift in thinking on federal gasoline tax, with the American Automobile Association last month arguing that an overhaul of the tax might be necessary for highway construction and maintenance. The administration is reluctant to act, but the IEA says:

Yet the fact that this politically sensitive issue is even being discussed – with a major car company (Ford) and two large refiners (Valero and Sunoco) supporting an increase of the federal gasoline tax – highlights how much perceptions and attitudes towards energy use in the US are changing.

  • They also comment on the $2.4bn worth of grants allocated last week for electric vehicles.

The IEA, however, notes the limited infrastructure for natural-gas powered cars, and is also sceptical on the subject of electric vehicles:

However, EVs will need to make substantial progress regarding their price and autonomy in order to become a viable alternative. Moreover, it is unclear whether the adoption of EVs on a large scale would contribute to curbing net US greenhouse gases emissions – vehicle emissions would certainly fall, but power generation emissions might rise even if smart grids were widely developed, as about half of the country’s power comes from coal‐fired plants.

On that subject of cost, the Atlantic has calculated the number of miles it would take to make the yet-to-be-produced Chevrolet Volt, which GM yesterday declared would have 230 miles per gallon, to yield savings compared with a similar, internal combustion vehicle. At $4 a gallon, “you’d need to drive around 177,000 miles to break even” with a Toyota Corolla.

Related links:

How much do we care about gasoline prices right now? (FT Energy Source, 22/06/09)

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