the situation historically was different than now, it does provide an
illustration of how quickly efficiency changes can affect demand. This slide focuses on the period from 1978
through 1987, which covers part of the time when fleet efficiency was improving
graph illustrates that efficiency improvements can affect demand in less than
10 years. During the early
period from 1978 to 1982 shown to the left of the dotted line, vehicle
miles traveled was basically flat, and gasoline consumption declined as car efficiencies
improved. Even after 1982, gasoline
consumption growth was small as car efficiencies continued to improve,
countering the increasing share of light-duty trucks in the fleet.
–During the entire 1978-1987
period, the total VMT (vehicle miles traveled) for light duty cars and trucks
rose at 2.4%, which is about the same as it was between 1995 and 2001.
–But in the 1978-1987 period,
there was virtually no growth in gasoline consumption, compared to an annual
average growth rate for gasoline of 1.7% for the 1995-2001 period.
vehicles are further along the efficiency curve now, we might not see the dramatic
percentage improvements in the future that occurred in the past. During the late seventies and 1980’s, the
fuel efficiency of the new vehicles was between 45% and 55% of the average
fleet on the road. Still, the
technology exists to improve fuel economy by over 30%.
United States targeted fuel economy improvement, we could see a dramatic reduction
in gasoline demand growth. For example, assume 3 years to design efficiencies
and then gradually introduce fuel economy improvements into new vehicles. If new vehicle efficiency reached a 28%
improvement in 7 years, by the end of 10 years, we could see demand growth
more than cut in half. That is, a “base
case” 2% growth rate would fall to less than 1% within a decade.