Is Gasoline Consumption Really Plateauing?

In my recent column, “The Next Transportation Crisis,” I quoted Department of Transportation figures to the effect that federal gasoline tax receipts had declined slightly in the first few months of 2007, possibly foreshadowing a long-term slowdown in gasoline consumption.

Reader Bill O’Keefe, a consultant who closely tracks the oil and gas industry, offers different numbers and a different interpretation. According to the American Petroleum Institute, he says, gasoline deliveries in 2007 set a first half record, averaging 9.2 million barrels per day — 1.5 percent higher than the first half of 2006. Gasoline imports set a record of 1.3 million barrels per day for the second quarter.

On a month-to-month basis deliveries may not match up with consumption, says O’Keefe, but they do track closely over longer periods of time. Monthly comparisons are tricky because a number of variables, such as weather, can briefly skew the numbers. “For example, if last February was unseasonably warm and this one was colder, there would be less driving and less gas consumed. But that would be weather driven and not an underlying change in demand.”

Let it never be said that I don’t entertain both sides of the story!

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7 responses to “Is Gasoline Consumption Really Plateauing?”

  1. Larry Gross Avatar
    Larry Gross

    …”federal gasoline tax receipts had declined slightly in the first few months of 2007….

    gasoline deliveries in 2007 set a first half record, averaging 9.2 million barrels per day …”

    so … the question for Mr. O’Keefe might be… “do gasoline tax receipts reflect actual useage trends?”

    What might be going on – is that gasoline useage is not decreasing – true – but we have more people, and more cars (that get better mileage)…. which translates into more autos driving more miles… necessitating more/wider/improved roads that cost 40% more than what the gas tax generates.. on an inflation-adjusted basis.

    I would posit that since VDOT see’s the Fed money as staying constant in the out years that
    this would be consistent with Mr.
    O’Keefe’s data.

    However, your original point about the shortfall of revenues relative to need pretty much stands even if the trendline of gasoline useage stays steady or even increases.

    more people – more cars – more cars on the roads – less money for adding infrastructure = transportation crisis

  2. Anonymous Avatar

    “…that cost 40% more than what the gas tax generates.. on an inflation-adjusted basis….”

    Would this still be true if we had adjusted the gas tax for inflation, instead of having it pegged to the gallon for the last 30 years?

  3. Larry Gross Avatar
    Larry Gross

    My understanding is that if the gas tax were indexed to inflation then we’d be in better shape (like some states that do) but the following factors still depress bang for the buck and portend longer term problems for transportation funding.

    * road building materials go up higher than inflation…especially concrete, asphalt and steel.

    * people are driving MORE than they used to especially at rush hour – which, in effect, uses up capacity of fairly expensive roads in and around urban areas.

    * adding lanes and new capacity in urban/commuting already-developed areas is a very expensive proposition … Rural Interstates cost on the order of 20 million per mile.. whereas urban interstates can easily cost 4-5 times that amount – AND they don’t add system-wide capacity… but rather limited to the locale that is improved… resulting in downstream bottlenecks.

    The ICC in MD north of DC is costing on the order of $120 million per mile I believe.

    The Springfield Interchange was originally estimated at about $250 million or so and ended up costing $670 million… and is already experiencing downstreaming of bottlenecks.

    It’s not just a single trend that is affecting transportation funding, it’s the several indicated above

  4. Anonymous Avatar

    But we’d still be better off than we are, having postponed the problem and now eating the higher costs.

    Again, I’m talking roads in general and road maintenance, not congestion relief, which is a separate problem entirely.


  5. Larry Gross Avatar
    Larry Gross

    Oh I agree.

    Once a need (a real need) is identified – the longer you wait for the money – the more painful the cost becomes.

    One could make an argument for getting enough funding on a timely enough basis to build before inflation eats the kitty..

    .. the problem is.. you get all that money together … and all kinds of folks figure out all kinds of ways to get their hands on it…

    .. so your choice is to get eaten alive by inflation or get eaten alive by the greedy….

    sorta like farming.. if the drought don’t get you.. and you get a bumper crop – it won’t matter cuz then the vermin population will triple and eat what you thought would be your surplus.


  6. Anonymous Avatar

    I guess greed is how we set priorities.


  7. Larry Gross Avatar
    Larry Gross

    I think there are two fundamental problems.

    1. – the lack of a genuine process for establishing RANK ORDER of projects – so that the priorities are clear

    2. – Funding funneled to projects that are at the top of the rank order.. and not dispursed .. scattered among a whole bunch of projects.. incrementally.

    Read the paper .. and often .. you’ll see where VDOT has come up with additional incremental funding for a project.

    The project might cost 30million and VDOT .. this year kicks in another million.. so that they now have .. say 15 million.

    and.. in ten more years of incremental funding.. the idea is that then they would have enough money.

    WRONG. In ten more years, that 30 million project will cost $60 million.

    … so right now.. VDOT goes around the state sprinkling incremental funding for all these projects and unless someone can show me otherwise – it appears to me that the money is essentially being thrown away…

    I see this as a lot like someone saving up for a house.. and the amount they are saving is not keeping up with increases in the price of the house.

    it’s a losing proposition.

    I wonder just how much of our highway funding… actually goes down a rat hole ….

    I think a very good question to ask… when VDOT adds a little funding to a project.. where is the actual money?

    Is it given to the locality to put into their kitty or is it essentially a paper number?

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