|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
|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 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%.
|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.