Driving Suffers Record Drop: 4.3% in Year

Source: Smart Money

By Rex Nutting

WASHINGTON (Dow Jones) -- With gasoline and diesel prices soaring to record levels, American drivers are cutting back sharply on the miles they travel, the Department of Transportation reported Friday.

Total vehicle miles driven fell in March by 4.3%, or 11 billion miles, to 246.3 billion miles, compared with the year earlier. It was the largest year-over-year decline in miles driven since the government began keeping records in 1942.

Americans drive more than 3 trillion miles each year. So far this year, cumulative miles driven are down by 2.3%.

The biggest decline came in smaller rural roads, where miles traveled fell 6.6% in March and were down a cumulative 3.5% through the first three months of the year. The smallest decline was on rural interstates.

Urban highway travel is also down, with urban interstate travel down 3.6% in March, and major urban road travel down 3.8%.

Miles traveled fell in every region and in 49 states and the District of Columbia. Only Hawaii managed increased traffic in March compared with the year earlier. The biggest declines were seen in the lower Mississippi states, with traffic down 8.6% in Kentucky and Tennessee and off 8.2% in Arkansas.

The Transportation Department study is based on thousands of automatic traffic counters throughout the country.

Other government data show a more modest decline in driving. The volume of gasoline sold has been lower than the year earlier for 17 of the past 18 weeks, and was down 0.6% year-over-year in the most recent data released by the Energy Department.

(END) Dow Jones Newswires

05-23-08 1254ET

Read more: http://www.smartmoney.com/breaking-news/ON/index.cfm?story=ON-20080523-000679-1254

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Like I've been saying on this board for a while....the price of oil is about to crash. Yes....as in come down. It is due to demand destruction. For the first time since 1946 Americans have driven less! Yes, we all need to drive, but must we drive? It is beyond obvious that the price of oil lately has nothing to do with the fundamentals of demand and supply. Speculators have taken over and will head for the exits as soon as the price tops (which in my humble view, they already have). The price of gas has risen so much that many Americans ( and others around the world) have either stopped driving as much or are taking public transportation). Our household has traded in two V8's for two much more fuel efficient V6 cars. Our family gasoline consumption has decreased by 40% in the last two months, with the same amount of driving.Gasoline demand destruction started months ago and the weak economy is not helping. Even though China and India have had increases in gasoline demand, the amount is very much overstated. Let's keep in mind that over 90% of the Chinese and Indian populations live on less than $1 per day. They can't even afford a moped....let's not even talk about a car.

When any economic story gets to the point where everyone is talking about it....the trend is over! It has always been the case. Everyone is talking about the price of oil...guess what that means? I think we will see $80 oil way before we see $150. Let's see who's right...

We need to rid ourselves of speculation in matters that are most critical to what I would wholeheartedly deem a "national security" issue. That is: nationalize the oil and fuel production industries. When you remove speculative interest or "privatization" from the production/distribution line then prices will go down to rational levels.

And the speculators will have to find new toys to play with. Maybe it will be something less damaging than fundamental mechanics to our poorly designed transportation infrastructure.

Even if current prices are ahead of the market, and come back down to $60/bbl or $80/bbl, the fact that these high prices have encouraged changes in consumption better prepares us for continued tight oil supplies. The interesting question isn't what the spot price of oil will be in December 2008, which speculation might affect, but what the spot price will be in July, of 2014.

:hippie:

...fuel and such, should be a crime anywhere on earth. And you say in this case they did us a favor? Are you a Republican?

There is a comfortable, sensible region between the economic fundamentalists, who believe that the market is the measure of all things human, and those who think everything would be great if just the government would nationalize the oil companies. :eyes: What happens the world over, both growing demand in other regions, and the fact that oil supplies are getting tougher, affects Americans.

:hippie:

Think about it: In the US the babyboomers are just beginning to retire. For the last 40 years or so they've been contributing to pension plans, IRAs, and the like. Their plans have been to effectively have their net worth, not counting any appreciation on fixed assets like houses, peak when they retire. In the next 15-17 years I expect investment income to peak.

A lot of the money's been held by government, in state pension plans. Then there's the insurance company's money: Much of their annual income comes from investing the money that we pay; it's not entirely a Ponzi scheme.

Where do you put all that money? In a bank earning 1.2% interest? No, you put it in stocks and bonds, in government securities. You put it in hedge funds and other investment vehicles to maximize returns.

Then a lot of hedge funds and quirky investment vehicles look bad. You take the money you have left and put it ... in the stock market? Well, that would certainly keep it inflated even when fundamentals are weak. Do you put some in the commodities market? Well, that would look like a bubble.

Where *do* you put the money when you're managing the California state investment fund or the University of Delaware pension plan?

And what's going to happen when all that money gets taken out of the markets for living expenses, when median incomes' flat or dropping so that people are able to save less for retirement?

and take the speculators' money. That's really the way to piss them off. I suspect many of them would rather be dead than lose their money.

In all seriousness, the commodities bubble is going to burst in the next six months. My guess is crude will be back to $70-$80 a barrel by winter.

Demand is up in other countries.

http://www.bloomberg.com/apps/news?pid=20601109&sid=a_YCEx7do3LQ&refer=home

Emerging Market Oil Use Exceeds U.S. as Prices Rise (Update2)
By Mark Shenk

Traffic jams in Beijing and humming air conditioners in Dubai are replacing U.S. highways and suburbs as the driver of global oil prices.

China, India, Russia and the Middle East for the first time will consume more crude oil than the U.S., burning 20.67 million barrels a day this year, an increase of 4.4 percent, according to the International Energy Agency in Paris. U.S. demand will contract 2 percent to 20.38 million barrels daily, the IEA says.

Economic growth of more than 8 percent in China and India, coupled with increasing car ownership among the countries' combined populations of 2.45 billion people, will more than compensate for falling U.S. demand. Oil use worldwide will increase 2 percent this year because of growth in emerging markets, the Paris-based IEA says.

``Does the U.S. matter anymore?'' said Mike Wittner, head of oil research at Societe Generale SA in London. ``Has the U.S. mattered for the last few years? It is debatable. As far as the oil market is concerned, demand growth is going to be continued to be driven by China and the Middle East.''

riding bikes or taking public transportation.

If we don't matter any more then we won't have any say about the politics or price of oil. We better hunker down and find ways to deal with this.

I still don't understand what the problem with solar is? Why can't we go solar? Seems like it just doesn't work out very well in real life.

works very fine in real life: photosyntesis. With solar power a multilayered climax-face garden or "agroforest" (trees, brushes, roots etc.) of one square kilometer can feed thousands of humans - without oil and external fertilizers.

Cutting down forest, planting a field of annuals, depleting the soil and then pouring in fertilizers produced wit fossile fuel and harvesting with heavy machinery using oil and then transporting the grains thousands of miles with oil to be packed with plastic made from oil and then transporting again with to a plastic mall made from oil where plastic people drive with plastic cars etc. (you get the picture) is about as dumb as dumb can get.

But it is supporting those who are calling the game. The rest of us should quit playing their game. There is a huge alternative economy just waiting to be tapped into.

Only thing more stupid and cruel than industrial farming is industrial meat production.

First baby step towards alternative or natural economy is to stop eating meat. Don't have to be even fanatical about, if can't do without, then eat meat only special occations and even then, none of that industrially produced meat, but only game and other "organic" meat.

NT!

is just not very efficient, although it is getting more and more efficient as time goes by.

Historically on the low end of demand increases.

China for one and they can't afford to do that for much longer at these prices. The Third world demand worm will turn much more dramatically and painfully than ours will. WE are better prepared to absorb the blows.

Denial of fundamentals is not stupid, it's insane.

There is no growth in supply, in fact net oil exports have been going down since 2005.

With US consumption contracting (2.1 percent first quarter of 2008) there is more than enough demand elsewhere to keep global market prices high. Even with your (questionable) assumptions, 10% of 3 billion (India and China combined) is 300 million, same as US. And it's not about driving only. Building new factories, infrastructure, manufacturing you name it with exponential growth - all the plastic "made in China" stuff we buy is made from oil. Fixed price oil, subsidized by state.

What does blaming - or killing (sic!) - "speculators" help when whole system is based on short sighted greed (getting shorter and shorter)?

not high, historically.

Which is no small amount when production is falling in Mexico, Russia, the North Sea, the North Slope, etc.

Until the demand starts showing negative growth or large amounts of new oil is produced, we'll continue to see oil prices go up.

According to your info, the demand for oil went up from 2006 to 2007 DESPITE the rising oil prices. Ouch.

I predict a drop in driving in the US of at least TEN PERCENT by this time next year.

The fertilizer is hitting the ventilator.

What next ?
Highway deaths Suffers Record Drop: 4.3% in Year

When enough people curb their vehicles......seems the demand for gas will drop.....refineries may have a glut
No ?

well, thats what I'm hoping for in all this

Everything is closing up down here. Florida is going out of business.

We're not slowing down much here in the Panhandle, but I suspect that is because we are close to Alabama, Georgia, and Tennessee, which are where most of our summer people come from anyway. It will be interesting to see what things look like this winter, when our touristas tend to come from Canada and the upper midwest.

The resturants, hotels and attractions that were on the edge will close down I agree. (And I see it all aroungd me) Honestly it is capitalism working.

Which takes up the majority of consumption, especially in power plants. Plus with this large desert land we have for solar use and the great plains being a perfect spot for wind farms, there is no excuse to divert money from Iraq and put it to use in propping up alternative energy. I would start with the Indian reservations, let them earn the revenue from alternative energy so they will no longer be dependent on casinos to survive.

Wow, that's about twice the round-trip distance from Earth to Neptune! Awesome!

Right now the absurd price of oil is being driven by the plummeting dollar and investment/speculation on the oil markets. People view it as a really good place to put their money after it was obvious that the real estate market was in a state of collapse. Besides, we use oil in so many other ways besides just fueling cars like plastics and other petrochemicals, power generation and jet transportation. Also bear in mind that oil is a finite resource that there is worldwide competition to consume. It's pretty naive to base the price of oil on your own gas usage trends.

Raise the price of gas so stinking high, the poor won't be able to afford to drive and those with money will cut it in half.

Smart thinking....of course, the oil companies get fat ass filthy rich off the scheme, and it give NO credit to the American public for cutting back. What an ass hat!

:D

Rush hour is still as horrendous as ever where I live.

Here in NY at least.

Even if the price of gas is stable, a recession will cut down on miles driven (laid off people don't go to work). But I think a good part of it is due to the rising price of oil cutting back on driving, independent of its recessionary effects.

Oil is not subject to the traditional "invisible hand" effects of supply and demand. Oil producing countries are putting out plenty of supply. I'll wager $150 will be far below the total the price of a barrel of oil ends at by 2009.

He says there's a 1% drop in GDP for every 1% drop in oil production.

He's predicting $15/gal "anytime within the next few months to next few years."

He's no quack.

The rate that demand goes down in response to rising prices is a function of its price elasticity. For gasoline, price elasticity is about -.06, which means that every 1% increase in price should lower demand by six hundredths of a percent.

Plugging some values into the equation: local gas prices a year ago were around $2.25, so a 4.3% decline in demand would predict current prices to be $3.86, which is a little higher than where they actually are now, at $3.70. Potentially, then, the price could be sixteen cents lower for that amount of demand destruction. Nice, not but not exactly a "price crash."

It's much the same story for oil, with a price elasticity of -.07 (same source).

The main point about a commodity being inelastic is that demand hardly budges, because people don't have much choice -- in the case of gasoline, people don't have much of an option to drive less.

Longer term, demand might go down significantly (taking prices down with it) as the automobile fleet turns over with more fuel-efficient cars, but it takes 10 - 12 years for the fleet to turn over that much. Given that amount of time, it's also just as likely that there will be more widespread alternatives to petroleum-powered personal transportation.

Meanwhile, don't bet the farm on prices going back down. With all due respect, $80 oil is firmly in its place in history, and in the very near future, even $150 oil will seem like "the good old days."

I think there is a lot of fat in our fuel consumption still. I know I have reduced my gas buying over 20% and I'm sure others have as well. It negatively effects the economy but me and my girl might stay home to watch a movie than go to the theater or hang at the pool rather than drive to the beach. It adds up.

Slight drops have also been noticed in rates of respiratory illness and obesity-related diseases, as commuters seek out alternative modes of transportation or turn to carpooling and telecommuting.

Next, we turn to a panel of expert commentators who will address what we can do to avert this undesirable trend towards a healthy, sensible society.

slight increase in air quality and maybe fewer smog alerts will go unreported ... ?

and wasting much more energy on average than other countries. And the only remedy is to make it hurt where it counts - in the wallet.

A lot of what Greens and environmentalists have been hoping for is coming into fruition now with the higher cost of gas. I personally couldn't be happier, because maybe now there is hope for sustainable energy solutions. I still think we should start taxing fossil fuels heavily though, to keep prices from ever going down again and to keep this absolutely necessary progress from stagnation.

...higher-amplitude fluctuations with shorter wavelength, on top of the ever-increasing trend. The supply shortfall is real, not manufactured, à la Enron.

people are suffering, not driving.

what idiots