People are driving less, and that is both new and important

by pdxblake

Americans like their cars, and a lot of the freight in the US is shipped by truck rather than rail, but in the last 5 years, the US has seen an unprecedented decline in the total miles driven.

Source: Calculated Risk blog

The only comparable periods as far back as the data go (1971) where miles driven declined was following the oil price spike in the 1970s.  Here’s the chart of the annual percent change in oil prices (adjusted for inflation using the consumer price index) since 1970.

The oil price spikes in the 1970s were larger in magnitude than any change except in the late 1990s when oil rose from the mid-teens to around $30 a barrel before continuing to rise up to right before the financial crisis when it hit $147 per barrel.  However, the rise in the price of oil in the late 1990s through to 2007 was from a low enough base that it did not lead to the same changes in behavior that the oil price rises in the 1970s.

In the wake of the Great Recession/Lesser Depression, however, the high oil prices (which tumbled right after the financial crisis hit, but have since rebounded and become persistent) does seem to have an impact on the total miles driven (as the first chart shows).  Even more striking is the total vehicle miles driven per person (to adjust the numbers for the rising US population).

It has been a decline of around 7% over the period of 5 years.  This is in part good news–people are responding to high and steady oil prices by reducing the dependence on their cars (probably due in large part to the decline of the exurbs where the housing bubble was most unsustainable, with people commuting 40-50 miles each way to work).  There is also some impact from the depth of the recession and the slowness in emerging from it.  For example, there is a clear relationship between an index of industrial production and vehicle miles driven.

Of course, it is not necessarily a permanent shift if the economy can get traction and start growing more rapidly (with rising employment which will increase the miles driven by the millions of additional people commuting to work).  However, in previous recessions, when industrial production reached its previous high (we are just shy of this level now), the vehicle miles driven were already increasing, something that has not happened yet.

With the concerns about climate change, and the lack of any sort of will by the government Republican Party to even acknowledge that we should do anything about it, perhaps a small contribution can be made through the market for oil.  The prices, which are dependent on the lack of drill, drill, drill global factors of supply and demand have remained high, but stable, which is preferable to allow the economy to adjust.  That is not to say that much more should not be done to tackle climate change–it is imperative–but with transportation accounting for a large proportion of carbon emissions, at least we have stopped digging on one side of the hole.

UPDATE (9/26): Thanks to Dan for pointing out that I am forgetting a factor, rising fuel efficiency.  See this graph: