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
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
- 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 1970’s and early 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.