Americans Curb Fuel Consumption - Finally

June 19, 2008
For the first time in nearly two decades, U.S. demand for gasoline is likely to decline this year, and may have finally hit its peak, according to a new study released today, which credits - or blames, if you prefer - gasoline reaching a "pain point" of more than $4 a gallon.

The report by Massachusetts-based Cambridge Energy Research Associates shows that the growth in the number of miles Americans drive each year has been slowing substantially since 2006, and is now trending downward for the first time since the twin oil shocks of the 1970s.

"Americans are now driving less and demanding greater fuel efficiency from their vehicles when they do drive," said Aaron Brady, CERA director, global oil. "Automakers are responding by accelerating the shift in their model mix. Both short- and long-term signals are all pointing toward decreasing future demand."

The report notes trends that favor reduced consumption, such as the sharp decline in sales of fuel-guzzling light trucks, as well as the surge in demand for hybrid-electric vehicles. The Toyota Prius, CERA researchers noted, actually outsold the Ford Explorer SUV, in 2007. For more than a decade, the Explorer was the best-selling product in its segment and one of the top sellers in the U.S., overall.

Brady described the truck downturn as "stunning," adding that "It's like falling off a cliff."

Despite the dip in fuel consumption - the first decline in 17 years - Americans are devoting more of their income to purchase gasoline. It is currently above 4 percent of the typical after-tax income, the highest level since 1981, when Americans were still feeling the pain of the last energy crisis.

As to what to expect looking ahead, "The impact of this shift towards greater fuel efficiency is only beginning to be felt," added Samantha Gross, CERA associate director, global oil. "The change is evident in the strategies of car makers and in the new focus on electric batteries. Stricter government efficiency standards, set to begin in 2011, will continue the trend."

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