|SWhile 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 rapidly.
|SThe 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.
|SBecause 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%.
|SIf the 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.