Out of Control Policy Blog

Does better fuel efficiency mean more driving?

A friend recently wrote to us and asked "Does increasing fuel efficiency engender more driving?" I thought I'd share a slightly edited reply from Randal O'Toole, which has interesting info.
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Does increased fuel efficiency engender more driving? I am not sure what you mean by "engender." If you mean, "if we mandate more fuel efficiency, will people drive more?" my answer would be: I doubt it. If you mean, "if fuel prices go up and auto makers offer people more fuel-efficient cars, will people drive more than if they did not have more fuel-efficient cars?" my answer would be: yes.

Tables MF-221 and VM-201 of the Highway Statistics Summary through 1995 and tables MF-21 and VM-2 of Highway Statistics for the years 1996 . . . 2003 show gallons of fuel consumed for highway use and miles of driving by year from 1930 through 2003. (Tables available here.)

The data shows that average miles per gallon reached a post-war low of 11.9 in 1973, the year of the first oil shock. Fuel economy then steadily increases through 1997, then flattens out.

Because of increased fuel economy, Americans drove 26 percent more miles in 1983 than in 1973, yet used only 5 percent more fuel. I am not familiar with the history of CAFE standards so I can't say how much of the increased fuel economy after 1973 was market-driven by higher fuel prices and how much was government-driven by requirements that cars be more fuel efficient. However, I understand that the CAFE standards were less stringent on light trucks (including SUVs) than on cars, giving people a way to avoid the standards if they wished. Since fuel efficiency increased after 1973 despite this way out, I hypothesize that the increased fuel economy was largely market driven.

My "model" for driving is that people have a dollar budget and a time budget for travel. When incomes are low relative to the cost of driving, the dollar budget is the main limiting factor. When incomes are high enough, the time budget becomes the limiting factor. Increasing incomes relative to costs leads to higher per capita driving until/unless everyone has filled their time budget. Increasing average highway speeds increases per capita driving until/unless the dollar budget becomes a limiting factor.

Since 1950, Americans have consistently spent 10 percent of their personal incomes on driving [see here and compare line 69 (user-operated transportation) of table 2.5.5 with line 1 (personal income) or line 26 (disposable personal income) of table 2.1)]. Before our time budget becomes limiting, we drive more as our incomes increase. After our time budget becomes limiting, we spend more by buying more luxurious autos rather than driving more miles or we drive more miles by moving to less congested areas so we can drive at higher average speeds.

Driving per driver has increased from 8,600 miles in 1963 to 14,700 miles in 2003. Unless highway speeds are significantly increased, I suspect the time budget will cap driving per driver at around 18,000 miles per year. Per capita driving will then increase only if the ratio of drivers to non-drivers increases.

People will react to higher fuel prices in different ways depending on whether their time or dollar budgets are limiting. If their time budget is limiting, they will not drive any less but may, in the long run, buy more fuel efficient cars. If their dollar budget is limiting, they will drive less in the short run and buy more fuel efficient cars in the long run. Of course, if the initial cost of more fuel-efficient cars is greater than less fuel-efficient cars (as in hybrids), this will offset the ability of fuel efficiency to "engender" driving.

In this country, there are still some people for whom cost is a limiting factor. Nearly 95 percent of non-Hispanic white families own at least one auto, but only 75 percent of black families and about 85 percent of Hispanic families do. So per capita driving will increase as more low-income families increase their incomes to become auto owners. High fuel prices will impact these people the most.

Adrian Moore is Vice President, Policy


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