CNBC

Power Lunch

November 30, 2006

Dan Yergin discusses Gasoline and the American People and Americans’ driving habits.

  Reuters

Americans drive less for first time in 25 years

Higher gas prices cut not only sales of SUVs, but also time spent on the road: study.

November 30, 2006

 HOUSTON (Reuters) -- High gasoline prices not only slowed fuel demand growth and cut sales of gas-guzzling vehicles in 2005, they also prompted Americans to drive less for the first time in 25 years, a consulting group said in a report Thursday.

 The drop in driving was small - the average American drove 13,657 miles (21,978.8 km) per year in 2005, down from 13,711 miles in 2004 - but it is more evidence that the market works and prices help control consumption, Boston-based Cambridge Energy Research Associates said.

 "Price matters," CERA Chairman Daniel Yergin said.

 The group's 2007 edition of "Gasoline and the American People" shows the U.S. romance with automobiles is changing, but not ending, due to tighter environmental rules, expanded fuel options, such as ethanol and biodiesel, and an aging of the population, CERA said in a news release.

U.S. motorists are currently paying up an average of $2.247 per gallon at the pump, down from a record $3.057 struck in September 2005 after Hurricane Katrina disrupted U.S. Gulf Coast refinery operations, according to AAA motor club data.

The share of U.S. household budgets going to gasoline and oil has has been relatively stable for decades, at 3.8 percent in 2006, compared with 3.4 to 3.6 percent in the 1960s, due to low fuel taxes and improved vehicle efficiency, the report said.

Miles driven per motorist was down partly because there are more elderly people driving, and they tend to drive less, the report said. Between 1980 and 2004, drivers under age 21 dropped from 18.8 million to 15.8 million and those over 65 almost doubled, from 15.4 million to nearly 29 million, CERA said.

 Average annual miles per vehicle also declined last year, from 11,946 to 11,856. That number for cars is smaller than average miles per motorist because there are more cars than licensed drivers in the United States, 1,148 per thousand, CERA said.

Growth in U.S. demand for gasoline slowed from an average 1.6 percent per year between 1990 and 2004 to 0.3 percent in 2005 and 1 percent in 2006, the report said.

Sales of vehicles with lower gas mileage "have begun to slump, with monthly, seasonally adjusted sales reportedly declining nine of the 12 months ending September 2006," CERA said. "Weakness is most pronounced for the heavier class of SUVs."

The report said sales of minivans and sport utility vehicles peaked at 56 percent of all vehicles sold in 2004, but slipped to less than 55 percent in 2005 and 53 percent so far this year.

NPR

Morning Edition

Study Finds Americans Drove Less in 2005

  by Chris Arnold

December 1, 2006 

Higher gas prices are having an effect on public habits. A new study finds that Americans drove less in 2005. It's the first time in 25 years they've logged -- on average -- fewer miles on the road.

Houston Chronicle

Number of miles driven by Americans drops

Fuel demand barely grew last year, report finds

By TOM FOWLER

December 1, 2006

Americans continue to use more gasoline than ever, but fuel demand barely grew last year and the number of miles driven fell for the first time in 25 years, according to a report released today from Cambridge Energy Research Associates.

The causes? Americans are changing the way they drive and the cars they buy following the recent run-up in gasoline prices, and there are more older drivers on the road who tend to drive less, according to the report, "Gasoline and the American People."

Sales of SUVs and light trucks dropped from a peak of 56 percent of all vehicles sold in the United States in 2004 to just under 53 percent so far this year, said Daniel Yergin, Chairman of CERA and a co-author of the report. In particular, new car buyers are no longer going for the largest of the SUVs, opting instead for smaller trucks and cars.

Hybrid vehicles powered by both gasoline and electricity account for just a small part of the drop-off in SUV interest, accounting for about 1.4 percent of all vehicles sold.

"Clearly price really does matter and has an immediate impact on what we do on the road," Yergin said. "But the bigger impact long-term could be what we do in the showroom."

China's impact on prices

Just eight years ago, in 1998, gasoline was a bargain for Americans, Yergin said, reaching some of its lowest prices . Gasoline then accounted for 2.1 percent of the spending by an average household.

But then worldwide oil consumption jumped by 3.1 million barrels per day in 2004, fueled in large part by growth in China. Oil prices surged and prices at the pump followed suit.

Gasoline spending now accounts for about 3.8 percent of household spending.

This quick rise in fuel prices made U.S. consumers aware of how oil markets here are tied to events around the world.

"A few years ago it never would have crossed the minds of most Americans that a shortage of electricity in China would lead to a surge in oil prices and then higher gasoline prices here," Yergin said.

Since then, Americans have reacted to the changing prices.

Demand for gasoline grew just 0.3 percent in 2005 to 141.6 billion gallons, well below the average annual rate of 1.6 percent from 1990 to 2004. Through November 2006, demand grew a below-average 1 percent compared to 2005.

But still, the average American motorist drove 13,657 miles in 2005, 40 percent farther than they did 25 years ago, thanks to longer commutes, the continuing expansion of the nation's suburbs and greater use of the car for daily chores. On average the American driver consumed 703 gallons of gas.

The number of miles driven fell slightly from 2004, however, when drivers drove 13,711 miles.

This small drop reflects the changing demographics of the United States where 14.5 percent, or nearly 29 million drivers, are 65 years old or older. The number of drivers aged 16 to 21 has dropped, from 18.8 million to 15.8 million.

With the U.S. population expected to grow older in the next five to 10 years, the growth rate of miles driven likely will stagnate, if not drop, the report says.

Where Americans buy their gasoline also has changed over the years. Today 65 percent of all gas it purchased at convenience food stores, a reflection of both the consumer's desire for one stop for fuel, food and coffee and the tighter margins of the gasoline marketing business, Yergin said.

Gasoline sales at "superstores," such as Sam's Clubs, are also on the increase, the report notes. They account for about 2.4 percent of all sales in the United States now, but could follow the trend in France, where 57 percent of gasoline sales are through such mass marketers.

A mild 2006 hurricane season and eased political tensions in some of the sensitive oil markets have helped bring oil prices back down in recent months, but the report concludes U.S. pump prices will continue to be closely tied to events overseas.

"How much that recognition will affect the decisions of consumers when they buy new cars in terms of emphasizing greater fuel efficiency or not will have much to do with what happens to gasoline demand in the United States in the years ahead," the report concludes.

MarketWatch

U.S. motorists driving a little less

By Jasmina Kelemen, MarketWatch

December 1, 2006

HOUSTON (MarketWatch) -- Americans' ability to cruise big cars along endless blacktop is as iconic as apple pie.

But a new report by a major energy-research group shows that the nation's love affair with driving has cooled somewhat in response to higher gasoline prices.

According to a report published by Cambridge Energy Research Associates, the rate of growth in gasoline demand slowed sharply last year to 0.3% from 1.6% per year from 1990 to 2004. Gasoline demand has picked up this year from the previous one but still trails historical growth rates, rising at a 1% rate during the first 11 months of 2006.

This contrasts sharply with significantly faster rates of growth from 1990 through 2005 in most emerging countries including China (6.6%), India (6.2%) and Brazil (4.5%), said the report.

Furthermore, motorists' average mileage dropped for the first time in 25 years.

The drop in gasoline demand neatly coincides with the rise of gasoline prices. Retail-pump prices rose from $1.59 per gallon in 2003 to $2.30 in 2005. Through mid-November of this year, prices have averaged $2.61, hitting a high of $3 in July, according to the report.

What's more, many Americans are doing the once-unthinkable -- foregoing gas-guzzling SUVs for smaller, more fuel-efficient vehicles.

"Americans' love affair with the automobile has in recent years turned into a passion for SUVs and minivans," said the report. "But the passion has cooled, with new purchases of light trucks, SUVs and minivans declining in 2005 and 2006 for the first time since 1990."

By 2005, the share of all vehicles that were SUVs rose to 41% from just 16% in 1975. SUV sales peaked at 56% of all new vehicles sold in 2004.

In 2005, the SUV share of total sales slipped to under 55% and 53% in 2006.

For those drivers that remain wedded to SUVs, it appears that many of them are buying the smaller models in their class, according to the report.

U.S gasoline still cheap vs. abroad.

Even as Americans chafe under what they consider to be exceptionally high gasoline prices, the Cambridge Energy Research report shows that U.S. motorists are actually paying far less than their peers in other industrialized nations, where gasoline is more heavily taxed.

In the third quarter of 2006, U.S. motorists paid an average of $2.86 a gallon for regular unleaded, compared with $3.49 in Canada, $4.42 in Japan and $6.20 in France 

Bloomberg

Gas prices drive conservation

Car-buying, driving habits changing, study says

Friday, December 01, 2006

Robert Tuttle

Higher-than-normal gasoline prices in the past two years have prompted American motorists to shop for fuel-efficient vehicles and drive less, slowing the growth of fuel demand, according to a report released yesterday by Cambridge Energy Research Associates in Cambridge, Mass.

Pump prices climbed above $3 a gallon during the past two summers. At the same time, consumption growth slowed from an average 1.7 percent a year in the past 20 years to 0.3 percent in 2005 and an expected 1 percent this year, the report said.

"Prices definitely matter," said Daniel Yergin, chairman of Cambridge Energy and one of the authors of the report. "You see it in terms of gasoline consumption, you see it in miles driven, and you see it in what people buy."

Between 1990 and 2004, the share of light trucks, including sport-utility vehicles, minivans and pickup trucks, grew to 56 percent of all vehicles sold, the report said. In 2005, the share of these vehicles fell to 55 percent and then to less than 53 percent this year. "The lasting impact is in the decisions not that people make at the gasoline pump, but in the decisions they make in the auto showroom," Yergin said.

The average fuel efficiency of light trucks was 17 miles per gallon in 2005, the report said. For the entire automobile fleet, it was 22 mpg. "After the surges in gasoline prices in 2005 and 2006, new-car buyers started shopping once again for fuel efficiency," the report said.

In recent months, however, moderating gasoline prices have sent sales of light trucks back up. For example, in September, the Ford F-series pickup and Chevrolet’s Silverado pickup were the topselling vehicles for the month.

Gasoline prices surged to a record $3.069 a gallon on Sept. 5, 2005, according to the U.S. Energy Department. The number of miles Americans typically drive has increased by about 130 miles every year since 1990, Yergin said.

"Last year, they drove 50 miles less."

The National Post (Canada)

Americans driving less for first time in 25 years

Gasoline prices cited

December 01, 2006

Americans drove less last year for the first time in a quarter-century, suggesting higher gasoline prices are having an effect on how U.S. motorists are putting pedal to the metal and not only on what kind of vehicles they are buying.

The findings, contained in a report released yesterday by Boston-based Cambridge Energy Research Associates, show that for the first time in 25 years, U.S. motorists' average mileage went down in 2005. The average American drove 13,657 miles last year, down slightly from 13,711 miles in 2004, according to the findings.

Analysts have argued for months that gasoline prices are affecting vehicle buying behaviour, in both Canada and the United States. But until now, there has been little evidence they're also affecting driving behaviour.

"Price does matter," said William Veno, a CERA director and one of four people who authored the report.

"I don't think Americans' love affair with the automobile has cooled. I think we've seen a period where the consumer has been shocked by the abrupt increase in prices ... We may see a slower rate of growth of miles in the future."

Changing demographics are also affecting mileage, CERA said in its report.

People drive less as they get older, and since an increasing share of the U.S. population will enter middle age or retirement in the next five to 10 years, the growth rate of miles driven per licensed driver is likely to slow.

You have to go back to 1980, when oil shocks were hitting the U.S. market, to see a drop in the year-over-year mileage of the average U.S. driver. In 1981, the average U.S. household spent 5% of its annual budget on gasoline and fuel, the highest proportion ever in that country.

Gasoline prices have jumped up and down over the past year, provoking anger among motorists and making pump prices a hot political issue. In the automotive industry, they've also had a clear effect: pushing more buyers to choose vehicles made by Japanese automakers such as Honda and Toyota, at the expense of SUVs and other light trucks made by Ford, General Motors and Chrysler.

"I think we're going to see a permanent shift" in buying toward more fuel-efficient vehicles, Chrysler Group chief executive Tom LaSorda said in announcing production cuts on Sept. 19.

Motorists across North America are driving far more on average than they did 25 years ago. But the recent past tells a different story. Several major U.S. retailers have cited reduced driving because of high gas costs as one reason for slowing retail sales.

Like Americans, Canadians have scaled back their driving. Like Americans, too, it's not a dramatic change -- at least not yet.

Data compiled by Statistics Canada show the average distance recorded on the odometer per passenger vehicle has trended downward in Canada in the past six years but not by a big margin. In 2000, it was 46 kilometres a day, or 16,944 km a year. In 2005, it was 44 km a day, or 15,987 km a year. There was almost no difference between 2004 and 2005.

The findings on U.S. mileage were somewhat surprising, Mr. Veno said, because the United States has continued to add jobs, which is normally a key driver for mileage as commuting increases. He said the results suggest U.S. motorists reduced driving not related to their jobs.

The price of regular unleaded gasoline hit US$3.06 per gallon in the United States in September, 2005, after hurricanes Katrina and Rita pounded the Gulf of Mexico and disrupted energy facilities. Prices again topped US$3 per gallon in late July this year in the wake of war in Lebanon. They've since fallen to an average of US$2.25 per gallon now. The average Canadian price for regular unleaded fuel stood this week at 89.3 cents per litre, according to data by Calgary research firm M.J. Ervin & Associates, or about US$2.06 per gallon.

Hart's Global Refining and Fuels Report

CERA: U.S. Automobile Picture ‘Transforming’

Peter Haldis

December 6, 2006

Increased gasoline prices, changing demographics and other market forces are “transforming” what Cambridge Energy Research Associates (CERA) calls the U.S.’ “love affair with the automobile,” the energy advisor concludes in its 2007 edition of Gasoline and the American People. 

“Americans have been driving further – 40% more than 25 years ago – and using more gasoline in bigger, more powerful cars and other light duty vehicles,” CERA said. “But higher gasoline prices have had a significant impact. The rate of growth in gasoline demand slowed sharply from its 1.6% per year pace (1990-2004) to 0.3% in 2005 and continued to grow slowly in 2006 at 1%. And for the first time in 25 years, motorists’ average mileage went down.”

One reason for this is increased gasoline prices. Gasoline prices increased from $1.59/gal in 2003 to $2.30/gal in 2005, an increase of 44.7%, CERA said. Through mid-November, U.S. gasoline prices have averaged $2.61/gal in 2006.

Despite this, gasoline prices are lower than in other developed countries because of lower taxes, CERA said. In the third quarter 2006, U.S. gasoline prices average $2.86/gal for regular unleaded gasoline, compared to $3.49 in Canada, $4.42 in Japan, $6.20 in France and $6.50 in Britain.

Taxes account for 15% of the U.S. retail gasoline price, compared to 30% in Canada, 45% in Japan, 61% in France and 64% in Britain.

Another factor is market saturation. The U.S. now has more vehicles than licensed drivers – 1,148 registered personal vehicles for every 1,000 licensed drives – CERA said. Meanwhile, Britain has 700 vehicles per 1,000 drivers, Mexico has 208, Brazil has 137, India has 11 and China has nine.

Demographics are also changing, CERA says. Of the U.S. driving population, 89% are licensed drivers and they average about 40 years of age. However, about 14.5% of the licensed drivers are at least age 65, which is nearly double the amount of drivers 65 and older 25 years ago.

“Because people drive less as they age, and [because] an increasing share of the U.S. population will enter middle age or retirement in the next five to ten years, the growth rate of miles driven per licensed driver is likely to continue slowing, as in the recent past,” CERA said.

Drivers are also slowly moving away from SUVs, minivans and light trucks. The segment peaked at 56% of new vehicles sold in 2004 and at the end of 2005 represented 41% of all vehicles on the road in the U.S. Sales of this segment slipped to 53% of all new vehicles sold to date this year. Sales of hybrid vehicles continue to increase, but only accounted for 1.4% of new vehicles sold so far in 2006, CERA said.

One reason sales of SUVs, minivans and light trucks have decreased in the past two years is fuel efficiency. The segment averaged 16.9 miles per gallon (mpg) in 2005, which was below the federal target. Their increased market share pulled the average fuel economy for all vehicles down to 19.8 mpg in 2005, from 20.2 mpg in 2001, CERA said.

Platts Commodity News

CERA gasoline study sees growing demand, global competition

November 30,   2006

A new report on US gasoline demand trends from Cambridge Energy Research Associates underscores oil industry confidence in a global market for its products stretching far into the future, CERA Chairman Dan Yergin told Platts Thursday.

CERA's special report on "Gasoline and the American People" updates a previous edition published in 2001. Although the trends presented in the new volume have been reported widely in news accounts of the last few years, CERA's new data confirms many observations made by experts tying oil and gasoline prices to the growth of the global economy, Yergin said in an interview.

Most striking for the oil industry, Yergin said, should be the implications from statistics comparing the numbers of autos per person in the US with numbers from China and India.

"When it comes to cars, the US is saturated and then some," according to the report. While the US boasts 1,148 vehicles for every 1,000 drivers, however, India has just 11 and China nine for every 1,000 drivers.

Yergin said those figures should portend dramatic room for growth ahead in Asia as that economy adds vehicles needing gasoline as fuel.

"Price counts and the love affair has cooled for SUVs," said Yergin, citing data indicating that the number of miles driven fell last year, notching the first such decline of this type in 25 years. The CERA report found that the average American drove 13,657 miles in 2005, down only slightly from the 13,711 of 2004.

The report also provides an analysis of gasoline prices adjusted for inflation that shows the highest gasoline prices in 2005 terms occurred in late 1918. The CERA figures indicate a second peak in 1981 when gasoline cost an average of $2.96/gallon in 2005 prices. That exceeds the inflation adjusted average of $2.53 experienced this year, according to the report.

But the report also notes that US consumers have ridden a "roller coaster" of gasoline price volatility in the last two years. As a result, CERA said: "American motorists are being reminded more clearly than ever that their consumption of gasoline is part of a much bigger and growing global market."

CERA described that growing market as "one in which stresses and imbalance caused by rising demand in Asia or natural disasters or political events in key crude oil producing areas translate into price increases at the pump."

In turn, CERA said it appears recognition of this new environment of volatility may be cooling the nation's passion for big cars. The report notes that market share for light trucks peaked at 56% in 2004 and now has slipped below 55% as "preferences among consumers began changing."

Yergin conceded that data for the past two years may not yet constitute a trend, particularly with gasoline prices even lower from earlier this year. But he said US automakers should be watching those numbers closely after having ceded the fuel-efficient new car market to foreign manufacturers. --Gary Taylor, gary_taylor@platts.com

Convenience Store News

Study: Americans Driving Less

December 4,   2006

Despite fuel consumption increases, demand for gasoline remains flat and Americans are driving fewer miles for the first time in 25 years, according to a new study by the Cambridge Energy Research Associates (CERA), reported the Houston Chronicle. While convenience stores hold a majority of gas sales, trends seen overseas might be the future in gas retailing, the study suggested.

What seems to contradict itself -- that while gallons used increases, demand remains flat -- is explained by a change in car buying and driving habits of the American consumer. Since the gas price run-up in 2005, Americans have changed the way they drive and the cars they purchase, the report stated. In addition, there are increasing numbers of older Americans that drive less than previously.

New car buyers are not buying the gas guzzler SUVs and trucks made by car manufacturers, but instead, are opting for smaller, fuel efficient cars and trucks, according to Daniel Yergin, chairman of the CERA. Sales of SUVs and trucks have dropped 3 percent since its peak in 2004, according to the report. Hybrids account for some of the switch, as they currently make up 1.4 percent of all vehicles sold.

"Clearly [gas] price really does matter and has an immediate impact on what we do on the road," Yergin said in the report. "But the bigger impact long-term could be what we do in the showroom."

Gasoline demand grew less than half a percent in 2005, to 141.6 billion gallons; far from the 1.6 percent growth seen in the 90s and early 2000s, the report stated. For year-to-date 2006, demand was slightly higher, at 1 percent, but still below the average.

In 2005, American drivers drove an average 13,657 miles, 40 percent farther than 25 years prior. They also used an average 703 gallons of gas. Longer commutes, reliance on cars for everyday travels and expanding suburbs account for this increase, the report stated.

However, the miles driven in 2005 were lower than those in 2004, when consumers drove 13,711 miles. The study stated that there are an increasing number of older drivers -- over the age of 65 -- who drive less; in addition, there is a lower number of young drivers -- ages 16 to 21 -- which dropped from 8.8 million to 1.8 million.

As the U.S. population grows older each year, the number of miles driven will level off, or drop, according to the study.

France: the Future of Gas Retailing?

The locations that Americans choose to fill their tanks is also changing. The study found that 65 percent of all gas purchased is at c-stores, due to the convenience of a "one-stop shop" for gas, food and coffee, Yergin said.

However, big box retailers that sell gas are seeing an increase in sales. Currently, the big box, supercenters and other retail formats that sell gas account for 2.4 percent of all gas sales in the nation. But the trends could follow those seen in France, where 57 percent of gas sales are from these types of retail channels, the report stated.

"How much that recognition will affect the decisions of consumers when they buy new cars in terms of emphasizing greater fuel efficiency or not will have much to do with what happens to gasoline demand in the United States in the years ahead," the report concluded.

Hartford Courant

Let's Keep Driving Less

Editorial

December 14 2006

Need a glimmer of good news? Try this: Americans drove less in 2005 than in 2004, the first year-to-year drop in a quarter-century.

According to Cambridge Energy Research Associates of Boston, the average American drove 13,657 miles in 2005, down from 13,711 miles in 2004. Also, demand for vehicles that get low gas mileage, notably heavy SUVs, also declined in 2005.

Both trends can be attributed in large measure to the spike in the price of gas in 2005, which went over $3 a gallon. It has since fallen back to about $2.40 a gallon.

That tells us that market stimuli work, that people respond to price. This ought to be the basis of a newly focused national transportation policy. We ought to be driving less, both to reduce our dangerous dependence on foreign oil and to reduce pollution and greenhouse gas emissions. If $3 gas will do the trick, then keep the price of gas at $3 a gallon by raising the gas tax. The revenue should be invested in transportation alternatives.

There's a movement afoot to bring tolls back to Connecticut. The better way to extract a user fee from drivers is at the pump. Tolls cause drivers to waste fuel queuing up at toll stations, can cause hazardous lane-changing at toll plazas and don't reduce driving. More expensive gas does. Let's use that to our advantage.

Chronicle-Tribune, Grand County IN

EDITORIAL

Do we have the drive to change our habits?

December 15, 2006

Maybe, just maybe, we're catching on.

For the first time in 25 years, Americans are driving less.

A study from Cambridge Energy Research Associates of Boston found that the average American drove 13,657 miles last year, down from 13,711 miles in 2004.

OK, it's not a monumental drop. But it's a drop. And maybe next year, we'll find that the number is even smaller.

That will signal that our national attitude about fuel-guzzling may be changing, and that is an important step toward independence from foreign oil.

The nation's population is increasing, but, according to news reports about the study, more people are finding other ways to get from Point A to Point B - bikes, walking, mass transit and skipping trips, for example.

This could be an indicator of an important change of heart and habits.