Why is US Oil Consumption Lower? Better Gasoline Mileage?

United States oil consumption in 2012 will be about 4.7 million barrels a day, or 20%, lower than it would have been, if the pre-2005 trend in oil consumption growth of 1.5% per year had continued. This drop in consumption is no doubt related to a rise in oil prices starting about 2004.

Figure 1. Comparison of Actual US Oil Consumption, with that that would have been expected if prior growth trend held. Actual based on EIA data.

Oil prices started rising rapidly in the 2004-2005 period (Figure 2, below). They reached a peak in 2008, then dipped in 2009. They are now again at a very high level.

Figure 2. US crude oil prices (based on average prices paid by US refiners for all grades of oil based on EIA data) converted to 2012$ using CPI-Urban data from the US Bureau of Labor Statistics.

Given the timing of the drop off in oil consumption, we would expect that most of the drop off would be the result of “demand destruction” as the result of high oil prices. In this post, we will see more specifically where this decline in consumption occurred.

A small part of the decline in oil consumption comes from improved gasoline mileage. My analysis incidates that about 7% of the reduction in oil use was due to better automobile mileage. The amount of savings related to improved gasoline mileage between 2004 and 2012 brought gasoline consumption down by about 347,000 barrels a day. The annual savings due to mileage improvements would be about one-eighth of this, or 43,000 barrels a day.

Apart from improved gasoline mileage, the vast majority of the savings seem to come from (1) continued shrinkage of US industrial activity, (2) a reduction in vehicle miles traveled, and (3) recessionary influences (likely related to high oil prices) on businesses, leading to job layoffs and less fuel use.

Gasoline Savings from Better MPG, Fewer Miles Traveled

Figure 3 below shows how the consumption of gasoline, distillate, and “All Other” oil products has changed since 1994. (Distillate is used mostly as diesel fuel, but some of it is used for industrial purposes, and some it is used for home heating.)

Figure 3. US Oil Products Consumption, based on EIA data. 2012 is based on partial year data.

Of the three product groupings shown, gasoline1 consumption is the flattest. Under “normal” circumstances, we would expect gasoline consumption to continue to rise, along with oil products in general, as shown in Figure 1 at the top of the post.

The amount of gasoline consumed reflects at least two different influences (1) the number of miles traveled, and (2) savings due to more fuel efficient cars. Based on data compiled by the US Department of Transportation, vehicle miles traveled (VMT) were rising by 2.2% per year prior to 2004, then suddenly flattened (Figure 4, below) about the time oil prices started to rise significantly.

Figure 4. US vehicle miles traveled, actual (based on Department of Transportation data) and expected based on prior trend. 2012 is based on partial year data.

The drop in vehicle miles traveled greatly affects gasoline sales. If vehicle miles traveled had continued to rise as quickly as in the early period, we would expect automobile mileage to be 21% higher than my current projection for the full year 2012, and gasoline use would be equivalently higher.

How do changes in gasoline sales track with changes in VMT? Figure 5, below, shows that they track fairly closely. Annual changes in gasoline consumption are a little below changes in VMT (averaging about 0.4% below VMT).

Figure 5. Three year average changes in vehicle miles traveled (based on DOT data) vs changes in gasoline consumption (based on EIA data).

It is also possible to calculate implied VMT per gallon of gasoline (Figure 6, below). This is somewhat of an apples to oranges comparison because VMT includes travel by vehicles using fuels other than gasoline (usually diesel, but occasionally natural gas or electricity). As a result, the calculated mileage in Figure 6 is higher than the actual average MPG for gasoline powered vehicles. If the proportion of gasoline powered vehicles in the mix stays fairly constant, the annual percentage change should still be accurate, though.

Figure 6. Vehicles miles traveled per gallon of gasoline based on DOT data, with trend line fitted by author.

If we apply the 2004 rate of fuel usage (or MPG) to 2012 VMT, we find that the improvement in fuel mileage between 2004 and 2012 reduced fuel usage by 347 thousand barrels a day over the eight year period, which is equivalent to a reduction of about 43 thousand barrels a day, per year.

The total reduction in gasoline use between 2004 and 2012, relative to what would have been expected, (based on the trend line in Figure 1, assuming the mix of products each retain their 2004 proportions) is about 1.49 million barrels a day. Thus, this calculation implies that about 23% of gasoline savings is from better mileage; the other 77% is from driving fewer miles.

One point of interest is the fact that US population has recently been growing by 1% per year. Because of the growing population, a person would expect VMT to grow by at least 1% per year, unless per capita miles driven is shrinking. Since 2004, vehicle miles traveled have been growing less rapidly than population growth. As a result, mileage per person has been shrinking, recently by a little over 1% per year. Prior to 2004, vehicle miles traveled were growing at 2.2% a year while population was growing at 1.1% per year, implying that per capita miles traveled were increasing by 1.1% per year.

How do vehicle miles per person go from increasing to decreasing? There are a couple of possible ways. One is by a reduction in the number of drivers; the other is by decreasing the number of miles driven for individual drivers. My friends who are automobile insurance actuaries tell me that at least part of the change recently is that fewer young people are driving. This is not too surprising–young people today have very high unemployment rates, so they are less able to afford the cost of a car.

Fuel Savings for Distillate and for Other Oil Products

Figure 7, below, shows the trend in fuel consumption since 1994 for the same fuels as shown in Figure 3. It is clear from Figure 7 that gasoline and distillate consumption have followed fairly similar patterns. It is the “All Other” category that has shrunk markedly.

Figure 7. Trend in United States Oil Products Consumption since 1994, based on EIA data.

At least part of the reason the “All Other” portion is shrinking is the fact that the All Other category includes quite a bit of oil products for industrial use, and the amount oil products used by the industrial sector shrank by 7.9%, comparing 2011 to 1994.

We can also look at the use of other energy products by sector, to see additional evidence that the Industrial Sector is shrinking, or at least, not growing nearly as much as the other sectors are growing. For example, if we look at electricity use by sector, residential use is up by 41% since 1994, commercial use (office and stores) is up by 44% since 1994, while industrial use is down by 3%.

Figure 8. Trend in electricity use since 1994 by sector, based on EIA data.

Also, between 1994 and 2011, use of natural gas by the industrial sector declined by 8.5% further suggesting that the industrial sector that is shrinking. One factor in this shrinkage is likely increased competition from China, once they joined the World Trade Organization in December 2001.

Of course, part of the reason for the lower growth in oil products use by All Other could be greater industrial efficiency. Industrial users, and users such a big agriculture and aviation, are in a position to see ways to reduce oil use quickly. Such approaches would include “no till” farming (often substituting oil-based herbicides for oil-based tilling) and cutting back on unprofitable airline routes, saving fuel by grounding underutilized jets and laying off workers.

Part of the reduction in All Other use, too, could be that at the high oil prices available recently, refiners can make more greater profits by ”cracking” and refining the heavy portion of oil, rather than sell it as products such as asphalt or residual fuel oil. Because of this, refiners are making less of the “All Other” products, and more Distillate and Gasoline. Users of heavy products are forced find substitutes, such as diesel or coal or concrete.

Another point of interest is the fact that the trend in gasoline and in distillate consumption both roughly follow the trend in the number of jobs available in the US economy.

Figure 9. Trend in number of US Jobs versus US gasoline and diesel consumption, based on EIA data.

There is a theoretical reason why gasoline consumption might rise and fall with employment. People who have jobs can afford to buy cars and drive them. People who don’t, often can’t afford to drive.

Distillate use tends to bounce around more, as if businesses (who tend to use diesel fuel) are more influenced by economic conditions than individual drivers driving gasoline powered cars. The overall trend still seems to follow employment, though. This would seem to suggest that if less fuel is used by vehicles, this is often accompianied by fewer workers–either fewer drivers for trucks, or fewer workers making the goods carried in the trucks. There may be gradual mileage efficiency gains, but in the short run, the big fuel savings come from operational changes that lead to using fewer vehicles and also fewer workers.

Summary of Where Oil Savings Comes From

As stated at the beginning of the post, United States oil consumption is about 4.7 million barrels a day lower in 2012 than would have been expected based on pre-2005 patterns. The way that this savings breaks out by product grouping is as follows:

Figure 10. Breakdown of US oil consumption saving, based on author’s calculations.

Decreased gasoline usage due to improved gasoline mileage amounts to 7% of the total, decreased gasoline usage because of fewer miles traveled amounts to 25% of the total, and a decrease in distillate use amounts to 17% of the savings. The majority of the decrease, 51%, comes from a decrease in the “All Other” category, which is most closely related to a decrease in industrialization.

The way the calculation is made is as follows: The trend line forecast of 2012 consumption of oil products shown in Figure 1 is distributed to product based on the product’s share of 2004 US oil consumption. The year 2004 is used as a baseline because it approximately represents the situation before the big rise in oil prices took place. The savings is then the difference between (1) these forecasts of consumption by product and (2) my estimates of 2012 actual consumption by product. The latter estimates should be fairly “solid,” because they are based on actual consumption through October.

Going forward, fuel efficiency changes are likely to play a larger role in fuel savings, because CAFE (Corporate Average Fuel Efficiency) Standards have been unchanged for about 20 years. For model years 2012 to 2016, they are again increasing, so auto makers are again making more of an effort to improve mileage.

Actual fuel efficiency gains in the next several years for the US fleet of cars will depend partly on the mileage improvements incorporated by manufacturers, and partly on how many of these more efficient (but also more expensive) cars are purchased. I have recently forecast that we will be entering another very-long recession in 2013. The recently announced decline in US GDP in the fourth quarter of 2012 is another indication in this direction. In a recession, it will be difficult to sell as many of the new fuel-efficient vehicles.

Another factor that is likely to be important for future actual vehicle mileage is the condition of roads. Mileage estimates are based on having good paved roads. If local governments find their budgets stretched thin, road maintenance may not get proper funding. We may even see more gravel roads, if asphalt is increasingly unavailable, and concrete is too expensive.


[1] Gasoline as used in this analysis includes any ethanol that is blended in. This has been an increasing percentage over time, and now is typically 10% by volume. The addition of ethanol tends to keep mileage down because ethanol only gets about two-thirds as many miles per gallon as gasoline. I have not attempted to adjust for this. The mileage gain would be somewhat better, if ethanol had not been added to the gasoline. An increase in the ethanol blend to 15% have been approved. As this is phased in, it will also tend to depress mileage gains.

This post originally appeared on Our Finite World.

An excellent analysis as usual by Gail.
However except for this note:

My friends who are automobile insurance actuaries tell me that at least part of the change recently is that fewer young people are driving. This is not too surprising–young people today have very high unemployment rates, so they are less able to afford the cost of a car.

Yes numerous data sources indicate that young people are not getting cars, driving and even not getting drivers licenses at all. So how are they getting anywhere? They are moving back to Transit oriented cities and places, taking the Megabus, and increasingly taking Green public transit. According to a recent USPIRG study of young people and transit 16% are taking more Green public transit for Environmental reasons!
It is not just due to not having a job.

My own daughter and her friends have moved to the city where she has not even needed to use the Zipcar membership I got her. All of her cousins except for one understand the need to reduce driving out of concern for greenhouse emissions and Climate Change which they all accept as reality, even the right wing cousin interested in the military.

I believe public transit has been increasing about 5% per year which has a disproportionate impact on saving oil. Intercity bus riders increased 27% last year!

This is why as James Kunstler has long advocated, Rail and Green Transit are key to mobility in the future. Even Bill McKibben in his latest speech to the Vermont legislature said there should be no more car expansion and there needs to be restoration of passenger service in Vermont.

It is a pity that Auto Addicted Atlanta rejected the recent proposed tax hike to pay for
restoring Green Transit in the Railroad Hub of the South. When you live in these areas it is understandable that Auto Addiction seems immutable like a force of nature. Unlike the NYC Metro area which already has the top 3 populous cities with the lowest car ownership per capita: New York, Newark, NJ and Jersey City, NJ.

But there are still 233,000 miles of Rail as in Atlanta all over the USA waiting to be restored to passenger service.

Yes numerous data sources indicate that young people are not getting cars, driving and even not getting drivers licenses at all. So how are they getting anywhere? They are moving back to Transit oriented cities and places, taking the Megabus, and increasingly taking Green public transit. According to a recent USPIRG study of young people and transit 16% are taking more Green public transit for Environmental reasons!
It is not just due to not having a job.

Another factor is the high cost of auto insurance, especially for anyone under 25, and most especially for males under 18. These costs, combined with real enforcement of insurance requirements and stagnant or falling real wages make it hard for an employed young person, much less an unemployed young person, to be able to run a car without parental subsidy. My own daughter, a librarian, got a job straight out of graduate school over six years ago and has exactly the same salary she had in 2006. She is in better financial shape than most of her friends from high school.

The contribution of better fuel economy can be expected to grow quite quickly. My niece's husband bought a 2011 full size pickup to replace his 2005 one, and was very pleasantly surprised to find that his real-life fuel economy was 19 miles per gallon. His old pickup, the same size, got about 13 miles per gallon. That's 32% drop fuel usage. Interestingly, his old pickup never did as well as the EPA rating (16 combined), but the new one does better (also 16 combined).

I have an adult daughter who lives in Boston and does not have a car. She found an apartment she could share practically next door to where she works, so she has no need to commute. Grocery stores and most other frequent shopping needs are nearby as well. Occasionally, she uses public transit or a taxi. There are even a few times she catches a ride with a friend. (She prefers not to drive in city traffic.)

My husband and I have followed somewhat this same model as well. We live on the edge of the campus where my husband works. Before we moved here (while the children were still in high school), we lived within a short walking distance of the school, so that our children could walk (even though there were no sidewalks). Everyone else's children rode the school bus, or the parents drove them to school.

I am not convinced that the Zipcar model is financially viable. Zipcar has continually lost money on the idea. A company has to have seven day a week rentals for its cars, or very much higher rates, to make a profit. Zipcar ends up being close by, but doesn't rent enough during the week.

Public transit is a separate issue. It seems to work where population is dense. It is less clear that it can be made to work where it is not.

From my experience with my children and their friends, I think that there are many reasons other than financial that their cohort is driving less.

Living in Boulder Colorado many of my children's friends are from super-affluent families, and lots of them went to private colleges, including Ivy League, on the east coast. Their families could afford cars for their kids without a second thought. But mostly this group has chosen to live in dense city cores where car ownership is pretty much more hassle than it is worth. So they almost all get by with transit, Chinatown buses, foot, and bike and maybe some car-share. I think the biggest difference is cultural, in that this group is rejecting the suburban/auto lifestyle, in favor of a mainly pedestrian urban lifestyle. Clearly cultural changes can be temporary and faddish, so I don't think anyone can really say if their distaste for automobile dependence will continue as they get older, have children and demanding jobs, etc. But I know that using laptops and smart phones on buses and subways is a normal part of life for this generation, so without self-driving cars they mostly consider driving time as wasted time, since they cannot be working and goofing off on electronics while driving.

I also disagree with Gail's comments about economics of car-sharing. The link posted above says that Zipcar is expected to be between break-even and $3 Million profit this quarter, despite massive costs for system expansion. Here is Boulder we have Ego Carshare which is a non-profit that has no resources for running at a loss, users must pay the full costs or shut down. The economics of many vehicles are overwhelmingly in favor of the car share model. I can use the car share pickup trucks for about $4 hour + 30 cents/mile, gasoline included. Even if I used the pickup truck every week of the year, I would only spend about $500 per year, versus the estimated $9000 per year cost of the cheapest pickup truck available (http://www.edmunds.com/car-reviews/lowest-cost-to-own.html). So with car share I can get the utility of a truck while spending better than an order of magnitude less. Aside from the hokey marketing fake masculinity aspect, there is really no reason for non-rural and non-construction people to own trucks. Car share and smart phones work together beautifully, just like urban bike share programs do too (GPS tells you nearest available vehicle, gives directions, phone reserves and bills car/bike share usage,etc.). This system makes way too much economic sense, compared to the dumb-ass model of buying a $20K personal vehicle that spends much more than half the time sitting unused but incurring very expensive depreciation. Car and bike sharing are growing at effectively geometric growth rates globally, so the financial problems of one particular company in one particular market (ie.,Zipcar which is growing itself at about 15% per year) cannot reasonably be used to predict world-wide results (see the graph in http://www.carsharing.net/library/UCD-ITS-RR-06-22.pdf). The financial analysts at Hertz and Avis certainly believe that car share will continue to grow, since they are making big investments in carshare, including spending $500 Million to purchase Zipcar (if they questioned the financial model would they invest half a billion?).

Thanks for the additional information on car-sharing. The only one I had run across was Zipcar.

I expect the car-shaing model will need to use older, less expensive cars to keep cost down, since ultimately, that is what most users would normally be driving.

The social as well as the financial and environmental aspects of car and bike sharing or mass transportation seem to be important to the younger generations.

Well all the answers I see from US of A

For my children here in the - well they are put off by insurance ( well I am as I FUND it )

18 yrs Girl full license 1 yrs no claims on a Ford KA 1.3 ( 38 mpg imperial of course) 1800GBP full comp. - third party fire and theft - 1760GBP - over here the reason given is third party claims for whiplash amongst other things.

I her college most actually are on their parents insurance - not a lot saved I might add as they insure on the highest risk driver.

For my Son , a Honda CBR 125 14BHP 90MPG imperial ( kool! still can reach 80 mph on motorway) 17 with full license ( restricted to 33HP - got in before the laws changed yet again here ) 600GBP third party F&T.

His friends? most are learning to drive a car like he is - again insurance is high > upto 3000GBP on a 1.0ltr car of 1200GBP value with 1000GBP excess ( daughters is 400GBP ) .

Does make you wonder why but when you see the poor bus services - two changes to town - 5 miles away , and three back ( I kid you not ) and the cost , to sit on a smelly often late bus ??

Right , if you're going to and from London , theres good routes but even the train costs are rubbish compared to buying a chinese 125 or moped and running that !

Across country ? forget it the infrastructure is geared to going to London and back - and you wont be buying or renting much there on a min wage job , even pooling .....

Well that's what its like from this side of the pond where I live . your mileage may vary


In Victoria, Australia, the youngin's need 120hrs on learner plates before they can apply for a full license. That's a lot of parenting time, not to mention cost of all that unnecessary "driving around". My prefect daughter (that's prefect, not perfect... though that as well! :)) - and it seems the vast majority of her friends, male and female, don't seem to have a burning desire to drive.

Fine by me, BTW.

Yet another anecdote. Our family downsized to one car four years ago. (Got rid of the minivan, just have a 2004 Prius.) We got two electric bikes in addition to regular bikes, and outfitted all our kids' bikes appropriate to ride in the city. (Lights, fenders, etc. We ended up with eight bikes in the garage where the van used to be.) We also got a subscription to CityCarShare, a non-profit competitor to ZipCar here in San Francisco. We find we don't use it much. We live up a huge hill, so in general though my husband and I bicycle nearly daily, the kids when teenagers preferred to take the bus.

My oldest is now 22, still doesn't have a driver's license. He's out of school with his own apartment and a full time job. To get to work, he bikes to Caltrain, takes his bike on the train. Middle child also has no driver's license and is at a college that doesn't allow freshman to have cars on campus. She can come home on vacation from her college by train. Youngest (15) is hot to get her license. We'll see. The substantial money we've saved on cars and insurance has gone into college tuition.

It is good that young people are moving to the cities and taking mass transit. That will leave more room in the suburbs for the 1.5 million people that will immigrate to the country each year.

Immigrants typically move to the inner city areas first, and tend to take mass transit because that is what they did in their home countries. The suburbs, I think, are just going to become rather empty.

Demographer Alan Ehrenhalt argues convincingly in his book The Great Inversion that FiniteQuantity is right: There is a new and widespread pattern at work in US cities whereby both the grown up children of the previous generation of the 'flight to the suburbs' set and an important number of retired suburbanites themselves are moving back to gentrifying inner city areas. And that they are being replaced in suburban and exurban locals by the poor and and new arrivals.

This is the reversal of the postwar pattern that RMG refers to, hence: The Great Inversion.

It's a very carefully constructed argument and uses data form all kinds of cities from the sunbelt to the rustbelt, not just the urbanists favourites of Manhattan, SF, or Portland.

It's observable all over the OECD, we call it here in Auckland the 'flight to the centre'. It goes hand in hand with the fall-off in driving; in other words many of those that can afford to rearrange their spatial conditions to reduce their driving are doing it. As usual the poor and new immigrants in fit with what's available. Poverty is now suburban, areas which suffer from disconnection by distance to employment and other services, poor urban form [cul de sacs etc], poor Transit provision; auto-dependency.

The really interesting question is: Is this simply a response to rising costs of car use or is it the 'spirit of the times', the zeitgiest, a fashion?

My contention is that it is both however the later is the more powerful force. And is as unstoppable as the abandonment of the inner cities and the invention of auto-dependant suburbia was in the post-war era.

The word 'urban' used to be code for any number of things to be avoided by polite society; decay, race, poverty. It now is increasingly associated with; sophistication, desirable real estate, success.

Worth a read:


That's interesting. I downloaded the book to my iPad so I can read it.

The author points to the example of Paris, which is quite different from American cities, and deliberately so. The French government deliberately encouraged the wealthy to live in the inner city areas of Paris, and they pushed the poor and the immigrants into the suburbs because that was the only place where people who were not wealthy could afford to live.

But that required the French to spend a lot of money on the Metro and similar urban services. US governments did quite the reverse and subsidized the building of freeways and rampant suburban development, while starving the inner cities of money.

He gives the example of Vancouver as a city which has developed quite differently than US cities, and I can relate to that since I was born in Vancouver and still visit there often. However, Vancouver was the only major city in North America which did not build any urban freeways, and driving there is quite a challenge. Gasoline is very expensive because of the multiple taxes on it. OTOH, the SkyTrain is a very advanced, albeit expensive piece of transportation technology, and definitely something that encourages living in the inner city area.

I don't think most Americans realized the forces that drove their movement to the suburbs were not random, and were not as important in other countries. The biggest factor was cheap gasoline, and that was compounded by the rampant construction of freeways. In cities that did not build freeways, Vancouver being the only major one in North America, commuting in from the suburbs to the inner city was a great deal less fun. The movement to the suburbs in other North American cities is coming to an end, mostly because of high gasoline prices and the fact that governments can no longer afford to maintain and expand the freeways, and the re-population of the inner cities is starting to become a major factor.

Yes Vancouver is the great model, Paris less so. Paris is wonderful, except where it isn't. Les Banlieu: Multi story slums for the disaffected mostly from France's old colonies. Too easily ignored by the ruling elite, hence the recourse to rioting in order to get noticed. An example of Corbusian modernism at its most miserable (great architect; terrible urban designer, just like Wright). Paris is a great Transit city though and they are now expanding this place saving resource out to the blighted Banlieu.

Back to North America; you can drive from Mexico all the way up the west coast and the first time you will have to stop at a traffic light is Vancouver. But I would disagree strongly with the idea that the Skytrain is expensive, what?; interstates don't cost anything? And how about opex? The driverless electric Skytrain is hugely cost effective and model for all the world, especially good in places like Canada (&NZ, Norway) with a huge hydroelectric resource. A great way to displace fossil fuel dependency.

What you really mean is that the auto-highway complex successfully structured the way we (taxpayers) fund infrastructure to make roads appear free and god given and right but Transit as commie, unaffordable, wasteful, and therefore highly contested and all but impossible to build. Insane, but it is the same all through the anglophone world.

The Skytrain and other good urbanist policies in Vancouver is one reason for that city's increasing success. The contrast with the more auto-dependant cities is only going to widen as this century unfolds. The Pacific Northwest looks a better bet to me both climate wise and in terms of spatial organisation and movement options than the entire sunbelt going forward.

When I said the Vancouver SkyTrain is expensive, I was looking at it from the perspective of the cost of the Calgary CTrain, which I rode to work for years.

The Calgary LRT system set a new standard for cost-effectiveness - it managed to run the equivalent of a 16-lane freeway through the middle of downtown without a lot of fuss or bother using the center two lanes of one narrow downtown street. Buses, taxis, and police cars used the outer two lanes. And it was essentially powered by wind turbines on a wind farm in Southern Alberta. See http://www.calgarytransit.com/pdf/calgary_ctrain_effective_capital_utili...

Yes, the Vancouver SkyTrain was inexpensive relative to the cost of urban freeways, but the Calgary CTrain verged on being ridiculously inexpensive. It carried passengers for a cost of about 27 cents per trip.

The movement to the suburbs in other North American cities is coming to an end, mostly because of high gasoline prices and the fact that governments can no longer afford to maintain and expand the freeways

That's undoubtedly a factor, but I think Patrick is right in pointing out that there's a shift in attitudes away from driving.

Among my peer group (mostly in their 30s), driving is widely seen as a chore and a waste of time, not a leisure activity or source of freedom. Several households I know have no interest in owning a car, despite having plenty of money -- they prefer to live centrally and walk or take transit. It's not a universal attitude, of course, but for many of us the celebration of car culture on display in 60s and 70s media looks not just archaic, but unfathomable.

As a result, I would expect car use to significantly erode in North America in the coming decades, regardless of oil prices. Factor in persistently high gas prices, better efficiency standards, and improving hybrid/EV technology, and I expect gasoline consumption to be in terminal decline even without any oil shortages.

It's obvious that expensive fuel and high unemployment will make it hard to live in car-dependent suburbs.

To me it is obvious that with infinite immigration and birth rates still above replacement level (a lot of that due to the higher birth rates of immigrant mothers) that today's American suburbs are tomorrow's American cities. So you can have your house in the suburbs and eventually it will be a house in a city. In California the suburbs have all filled in wall to wall and now the city councils scour the area looking for commercial buildings that can be torn down and replaced by condos or taller commercial buildings to support the population growth from immigrants (California has had a negative outflow with respect to the rest of the US for most of three decades).

And while it would seem likely that immigration would stop at some point if the price of oil skyrockets and brings the economy to it's knees, that might not ever be the case. Immigration is a very sacred cow and not a peep, not a single peep was heard about stopping it - not even stopping illegal immigration - when unemployment was consistently at 10%. In fact, CEOs and economists are always praising immigration and while not always advocating an overall increase, are always advocating an increase in the number of college educated immigrants. And the silence with regard to an infinite immigration is not just at CEO and economist gatherings. Even Peak Oilers speak very little of it.

Immigration from Mexico is pretty much zero right now, due to unemployment in the US, and higher growth in Mexico.

And, US birth rates are below replacement, and dropping.

"Immigration from Mexico is pretty much zero right now, due to unemployment in the US, and higher growth in Mexico."

I assume you are referring only to illegal immigration from Mexico, as this


shows that in 2011 Mexico sent more people legally to the US than any other country. I don't think that they would have gone from the highest amount to 0 in one year. I don't believe there are any people reporting how many illegals they are hiring or how many illegals they are renting to, so any claim that there are less illegals (let alone that there are virtually none) coming from Mexico is unverifiable. Because there is such a tremendous disparity in standard of living between the two countries, there is still a tremendous incentive to come illegally to the US, even if someone has a job in Mexico. The other thing is that they are in the process of legalizing millions of illegals. At some point employers and the rich will want a fresh group of illegals as they will work for less than legals work for, and under more severe conditions and with more disregard from the employer.

"And, US birth rates are below replacement, and dropping."

If you look at this graph, you will see that it has dropped before, and subsequently risen. So I think it is too early to declare a negative population growth rate from internal births. In fact, between 1960 and 2010, the lowest fertility rate was in 1976. The graph only shows data to 2010, but from that it can be seen that only one year since 1976 (2007) has had a higher fertility rate than 2010. So if it is dropping in the last two years, the 36 year long term trend is up.


What baffles me is that I always see a significant percentage of our population growth (up something like 110 million since 1970) as being from internal births. And yet that graph shows a 2.1 or lower fertility rate for over 30 years. Presumably that is from births being more than deaths through that period. But even with the past low fertility rates, the US is projecting births to be more than deaths for the 45 years from 2015 through 2060, although they will become closer as time goes on. They are also projecting a population increase during that period of a 100 million people. But I guess all will be fine if the 100 million new people take the bus.


The population growth from legal immigration continues at a pace of over 1 million a year as shown in the PDF above.

It's easy to cut fuel costs. For instance, buy a Prius C. If that doesn't do it, buy a Nissan Leaf.

Actually, the unemployed will find it much easier to live in the suburbs, because the cost of living is much lower. Of course, that only works if the suburbs allow zoning for small, cheap apartments. If not, that may force people to where those exist, like dense cities.

If someone is unemployed, I think they are better off living in the suburbs. With no money they will need to board for free from a relative or friend, and there is more room in houses than in small, cheap apartments.

I think that the 2004 video "End of Suburbia" was generally very accurate. Link to trailer:


Except it's completely unrealistic.


Electric vehicles (partial and 100%) work just fine for transportation. Electric rail works just fine for freight.

Nick. No.
Perhaps you have heard of the London Underground, or all the other successful passenger rail systems in the world. I guess you are American (my apologies if not), if you will concede that NYC is part of the union you might have ridden the subway there? I think we can agree that it works and only carries human self-loading freight, otherwise known as passengers and is powered by electricity.

I may be wrong but what it seems you are trying argue in your comments here is that the highly dispersed world of he American suburbs can remain unchanged and viable through the agency of the electric car. Maybe. But I wouldn't count on it. Especially as we are already seeing a decline in enthusiasm for this spatial order, not critical yet but the trend is clear. Those that do remain viable are likely to be much more like earlier suburbs built more densely around Transit nodes.

I agree that electricity is the coming energy system but this side of a huge revolution in battery technology tethered systems will always have huge advantages. No need to waste most of the energy dragging that heavy battery around.

Remember the first suburbs were in fact built around the train and remain pretty good places to live in those cities that didn't destroy them by ramming freeways through and running down or pulling out the Transit system.

But I guess it's a question of what we can afford to do; change all our vehicles and power them or move to less auto dependant places... We'll probably do a bit of both.... But I wouldn't be aiming to retire on the value of a big house in a distant 'burb; may not be all that many takers in a decade.


I like electric rail - it's safer, and I can read while I ride - I use it daily. I like dense, walkable urban neighborhoods - that's where I live.

But, I recognize that it's much more expensive than exurban living.

The average new car in the US costs $30k. The average US car gets 21 MPG. Partial EVs (hybrids and plugins) and pure EVs range from $19k to $33k, and cost much less to operate. So, there is no life-cycle cost penalty to move to EVs, and the additional upfront cost is very, very small compared to the premium for urban housing.

I hope that rail and Transit-Oriented Development becomes more popular, and that it gets built. But to suggest that PO will *force* the end of the suburbs is highly unrealistic.

Nick you're just doing the selective math that every generation of Americans since the 50s have been taught. Sprawl is the most wasteful, and therefore expensive, social order yet devised, and was certainly only possible because of cheap liquid fuel. Not only directly but also because cheap oil provided the excess easy capital for the OECD [especially the anglophone countries] to expand in this crazy way. Not to mention giving us the mad faith in limitless growth to borrow against.

No sadly PO is not going to get us new transit focussed euro cities, because we've blown the money and then some, living like teenages on that last summer for a few decades. What will happen is that the most auto-dependant and unfixably sprawly [+ water scarce and aircon hungry] cities are going to do it tough. And those happy places that are already denser and better connected outside of the private car will fair better [depending on climate vulnerabilities too].

End of the suburbs? No, although some will go like Detroit's inner city did. This is the point; the blight is reversing: It is survival of the fittest for places, where fittest of course means; 'the best fit'. Those places that best fit the post-cheap oil new economy will be the most successful.

The really interesting question is where are this era's Detroits? Can the obvious solar opportunity save Phoenix and ABQ? Or will their exurbs go back to desert. And how will it go? Will it be Katrina and Sandy events and just a failure to rebuild afterwards [and Fukushima]. Or will it be more financial storms with people just walking away from negative equity...?Fascinating.

The middle of your continent looks likely to be doing it tough for water and with heat, balanced by the current hydrocarbon boom, and the entire UK has an energy crisis that they don't seem to be admitting.....

I've used the "Sixth Sense" metaphor. In the Sixth Sense movie, many ghosts don't know they are dead, and they only see what they want to see. IMO, for most Americans in the 'burbs, our auto-centric, suburban way of life is dead, but most of us don't know it yet, and we only see what we want to see.

just doing the selective math


No offense, but you're not doing the math at all. EVs are perfectly affordable, and wind and solar are affordable (and getting cheap), scalable, high E-ROI, etc.

Again, what's the math behind your intuition that electric transportation won't work?

t this side of a huge revolution in battery technology tethered systems will always have huge advantages. No need to waste most of the energy dragging that heavy battery around.

Actually, it takes very little energy to drag batteries around. The main reason weight is important for vehicles is the energy used to accelerate the mass, which is wasted when one brakes. Regenerative braking, enabled by those batteries, solves that problem.

That's why hybrid electric cars reverse the classic ICE pattern of improved mileage on the highway, and get better mileage at low speeds: aerodynamics become more important, and air friction is lower at lower speeds.

No, you are unrealistic. Electric vehicles are expensive and available in very low volumes and the range is poor and they need at least 8 hours to recharge off a regular charger. Electric rail ? Sounds very good to me. EV's are ok for short commuter trips, but don't look for EV's to replace heavy trucks or other heavy transportation equipment,and if you want to tow a heavy trailer then the EV's range again a problem.

Keep in mind the above is based on current capabilities and production of electric vehicles. Like I said, with a crust concentration of 0.005 parts per million, lithium isn't a widely available resource in large volumes. The barrier to adoption of EV's is cheap, widely available batteries.

Of course, the flip side of declining liquids consumption in OECD countries is increasing consumption in developing countries, led by China. The annual Brent price increased at 17%/year from 2002 to 2011, with one year over year decline in 2009. Over this time frame, the Chindia (China + India) region's consumption increased at 6.1%/year, from 7.6 mbpd in 2002 to 13.2 mbpd in 2011 (BP). Chindia's Net Imports (CNI) increased even faster, going up at 9.6%year, from 3.5 mbpd in 2002 to 8.3 mbpd in 2011.

Link to, and excerpt from, a prior post, with graphics:


I think that the most accurate assessment of the global situation is that net oil importing OECD countries like the US are gradually being forced out of the global market for exported oil as the developing countries, led by China, have consumed an increasing share of a declining post-2005 volume of Global Net Exports of oil (GNE*).

Our data base shows that the ratio of GNE to Chindia's Net Imports of oil (CNI) fell from 11.0 in 2002 to 5.3 in 2011, and the rate of decline in the ratio has accelerated in recent years, falling from 8.9 in 2005 to 5.3 in 2011. At the 2005 to 2011 rate of decline in the GNE/CNI ratio, in only 18 years the Chinidia region alone (China + India) would theoretically consume 100% of GNE . . .

In my opinion, net oil importing OECD countries have gone increasingly into debt, from real creditors and accommodative central banks, trying to keep their "Wants" based economies going, as the developing countries, led by China, have consumed an increasing share of declining volume of post-2005 Global Net Exports of oil.

I agree that this is what is happening to the oil. It is going to countries like China and India, who can make better use of it, while we increasingly go into debt.

There is a myth that if US energy efficiency raises auto fuel efficiency sufficiently, the oil will just be left in the ground, for our children. In fact, world oil supply is constrained. We will use 100% of what is pulled out of the ground. Less demand may mean a little lower oil price, but not necessarily less oil produced for the world as a whole. (Of course, if price drops too low, there will be a big drop in production, as in 2008.) In any event, the oil will be used, quite likely by some one in China or India, who can leverage its use better than we can.

A couple of related posts: Energy Leveraging: An Explanation for China's Success and the World's Unemployment

Why world coal consumption keeps rising; What economists missed

For any commodity there are supply demand curves, both for production and consumption.

If people in the US use less oil, then reduced demand will drop global prices, which will spur consumption at other locations, but also provide less incentive for "producers" to extract more oil from the ground (nobody actually produces oil, of course). So whether US energy efficiency will actually reduce total global oil consumption depends on the shape of the global consumer and "producer" price elasticity curves.

But there is no doubt at all that increased US energy efficiency will reduce energy imports (and thereby improve the trade deficit/balance of payments), improve air quality, save consumers' money, and help develop the efficient technologies required to address both climate change and fossil fuel depletion.

There is a myth that if US energy efficiency raises auto fuel efficiency sufficiently, the oil will just be left in the ground, for our children.

I have never seen anyone espouse the simplistic view quoted above, and would be curious to see a link to anyone making such a silly claim. Clearly individual policies can either speed or delay oil extraction, for example allowing East Coast off-shore oil drilling clearly speeds extraction/depletion, just as the moratorium slows it. The policy position of slowing US oil production wherever possible makes economic and environmental sense, without reference to any silly belief that the oil will "just be left in the ground".

For these reasons, I personally support continued restrictions on East Coast off-shore, Keystone pipeline, ANWR, fracking, etc.. I expect that most of those fuels will eventually be burnt, but delay allows and incentivizes the development of societal change, renewables and efficiency while "Drill, Baby, Drill" does the opposite and sells more SUVs instead.

I agree that from an individual country's point of view, there are reasons for reducing oil consumption, including improving balance of payments. This is a major reason why efficiency improvements are so popular.

Indirect effects are not taken into account in economic models. We know that in practice, world effects are very different from individual country effects. In my view, anything that acts to increase world trade will increase total world emissions, even if the effect on the home country is beneficial. I am sure you have seen how world emissions have increased in recent years, after the Kyoto Protocol was signed in 1997. (See my article Climate Change: The Standard Fixes Don't Work.)

You may not have heard such a simplistic quote, but the view seems to be quite popular among people who are concerned about oil limits. Of course, King Abdullla has made a comment about leaving Saudi oil in the ground for Saudi children.

The comment seems to be made quite often in response to Oil Drum articles, for example, in response to this article. I know in talking with some ASPO-USA members, this is the motivation for buying a Prius, or taking some other oil-saving action. Of course, if the person saves money by the oil saving action, some of the money previously spent on oil will likely be spent on something else, which may also use oil. For example, using the money saved on a vacation.

Normalized liquids consumption for (2005) Top 33 Net Oil Exporters, China, India and the US, from 2002 to 2011 (2002 consumption = 100%, BP data), versus annual Brent crude oil prices (in red):

I think that it is likely that these consumption trends will more or less continue.

...until they can't.

Yeah, it's clear that the US is going in the right direction, and that China and India are digging themselves into oil-import holes.

I would be interested in knowing the impact, if any, of the growth of internet sales on fuel consumption. I think this was debated at some point on TOD but wonder if anyone has any numbers on this.

It seems like it is more efficient for one UPS truck with 100 boxes to take an optimized route to deliver to 100 residences rather than each of those residences to drive to pickup each of those boxes. One key question, however, is whether that actually cuts back on shopping. Maybe most people continue to shop at physical locations with the same regularity while also buying online.

Another issue is that in another era (maybe it still exists in places like New York), when I was a child, it was common to call the grocery store with a grocery list and have the store deliver. No doubt this exists in some places now but it not common. This also seems like a more efficient and certainly more hassle free way to shop. I currently use this kind of service here in Colorado from what is called Door to Door Organics where they deliver once a week.

Back in the 1950s, it was perfectly possible for a family in a small town to be a one-car family (or even a zero-car family). Everything was within walking distance, so children could walk or bicycle to school. Milk was delivered several times a week. Groceries were delivered, if a person called and asked. Clothes often came from a catalog. Furniture came from the store downtown, which delivered.

We are making small steps back in this direction with, as you note, some deliveries of groceries, and some purchases through Amazon. I know I am going to physical book stores less, and I think others are too, judging from the number of book stores that are closing their doors. But my guess is that this the change we have made so far is just small inroads.

I think that one thing that holds up going back to the way things were is the physical layout. Homes are now built on large lots on cul-de-sac streets that make it hard to get anywhere within reasonable walking distance, and make the connecting streets terribly busy. Businesses in the center of small towns have been replaced by stores selling handicrafts and other non-necessities, while grocery stores and Walmart have moved out to the edge of town, making them much harder to walk to. Grocery stores now are huge. In years back, there were small stores on the corners in the city, where a person could walk and purchase the basics. (There may still be, in some places.) Now most people have to drive to a megastore, because the (many fewer) megastores are not nearby.

Agreed that physical layout is a major contributor to US auto dependence.

What is interesting to me is to watch the incremental changes in physical layout that mostly seem to be moving in the other direction. Exurban property has lost much more value than core urban property (http://crosscut.com/2011/08/31/real-estate/21246/Sick-suburbs-expiring-e...). All over the US, developers are adding density to existing urban cores (whenever regulations allow it), and profiting from high demand. Most of the urban re-development that I see is mixed-use, with retail on ground floors and office/residential above. So much of the "sprawl" physical layout of the US is densifying in place, while extreme ex-urban sprawl is becoming either devalued or de-populated. Plus transit-oriented development focused around transit service is booming everywhere that transit exists.

Public transit is a separate issue. It seems to work where population is dense. It is less clear that it can be made to work where it is not.

Agreed that every transit mode has a minimum density for economic viability. But there is positive feedback when transit development encourages more dense transit-oriented development, which encourages more transit use, which encourages more TOD, etc.,etc.

The reduced auto dependence and increased transit usage among young age cohorts means that political support for transit investment will only grow as the auto-dependent older generation passes from the scene. My experience with co-workers who got a free transit pass was that the first transit usage was a big roadblock that many never crossed, but that those who used transit once often eventually made transit a normal part of their lives. How many US citizens have never used a bus or subway? So my guess is that a cohort that grew up using transit will continue to use it at some level throughout their lives, unlike people who grew up with auto-dependence as an unthinking and automatic response.

I think it would help if people can get rid of some transportation habits that are very wasteful. For example, if you need to drive to the shop, try making one large shopping trip per week and not every day (some people do that). If you have a shop nearby, try walking there (a bag on wheels is extremely practical). You get exercise and use the local shops which is always good.

Never drive to the gym! If you need to exercise, run around the house 10 times or in the woods or wherever - get some manuals and lift in your garage - or just tidy and clean the house thoroughly (I mean scrubbing) - the exercise in this is great!

Consider getting a tablet and stop buying physical books and newspapers, think of the paper you save and transportation savings. Ofc this isnt good for book stores and sort of assumes that technology and services can exist for a very long time (lets assume that). You wont have to fill your house with books then either - its a more minimalistic approach to reading, not for everyones liking, but the benefits are great (less bookshelves to dust). The same can be said for music and movies. I just went to the movies with my wife and kids and the total price (we used public transit at least) was close to $100 including 2 tickets bus/tram (family ticket), 4 movie tickets, snacks. Most likely I could have bought that movie on a DVD in 1 months time for $15 tops and $10 for some snacks. Ofc if everyone did this the movie theatre would go bust but its really rather silly today to use all this energy and money to get to some place to watch a movie when it can be just as cosy at home (and you can pause the movie and go to the loo). :)

Its clear that a lot of the services offered today is really only possible with the extremely cheap energy we have had (and still have to some degree), although we all know this will change soon. I am under the impression that this change is somewhat good as we need to rethink how we use energy and build our infrastructure to be more walkable or made for public transit.

These dudes seem to concur with your opinion on UPS vs. individuals driving to a store to p/u their stuff:


Not sure if riding a bike to a store to p/u would be best of both worlds, guess it depends how optimized Fedex's loads are compared to the store's...


Yes, absolutely true. One truck delivering to 100 homes is much more efficient than 100 homeowners driving to one place. The problem is the orders aren't concurrent, i.e, orders come in from time to time not all at once.

The three month average Net Petroleum Imports peaked in March of 2007 at 13,089,000 barrels per day. They reached almost that three month average in November of 07 and again in October of 08. Since then the three month average of Net Imported Products have fallen by almost 5 million barrels per day.

Since then US production has risen by about 1.8 mb/d. That would put US consumption down by about 3 million barrels per day. However the US Monthly Energy Review says "Total Products Delivered" (consumption) is down by just over two million barrels per day since the average of 2007.

Using the Monthly Energy Review's figures, US consumption of petroleum products is down at just about 10 percent from the average for 2007 to the average for 2012. That is all products including propane, jet fuel, heating oil and everything else. It is my opinion that the greatest part of that is demand destruction due to high prices. Some of it, a small part, is due to better gas mileage from new cars on the road.

Monthly Net Imports of Petroleum Products, 3 Month Average in KB/d. The last data point is Feb. 1st 2013.

Net Imports of Petroleum Products photo NetImports_zps4a3b5449.jpg

Ron P.

It is my opinion that the greatest part of that is demand destruction due to high prices. Some of it, a small part, is due to better gas mileage from new cars on the road.

We are in agreement then.

Gail, we seem to agree on most things. ;-)

Ron P.

I came to similar conclusions -- that most of the decline in US oil consumption was due to the recession, not to greater efficiency -- in my investigation of this question back in September: http://www.getreallist.com/has-vehicle-efficiency-really-curbed-u-s-oil-...

Ah, but the claims you show in your article aren't that vehicle MPG was the cause of declining consumption - the claims are mostly about overall efficiency of fuel use (Yergin notwithstanding - as we know, he'll say anything). As Gail pointed out, declines in oil consumption have come more from non-transportation uses.

Sure, MPG hasn't risen much. But, vehicle miles travelled hasn't fallen much, and that decline can be explained by other factors besides the recession. We know for sure that young people with jobs are deciding not to buy cars - their VMT is down by 20%. Other factors include shifts to carpooling, transit, and online shopping.

The bottom line: the meme that declining oil consumption is a bad thing is unrealistic.

We need to kick our addiction to oil, and that will be a good thing.

However you slice it, be it MPG or something else, it's clear enough that efficiency gains played a small role in the decline of US oil consumption. Shifting transportation modes from private autos to mass transit and carpooling, and shopping online rather than in person, are recessionary effects because they're cheaper than driving. What Gail calls "deindustrialization" can also be interpreted as a response to the recession.

The industrialization occurred when production was moved to India and China. You can see it in the U.S or here in Finland. China (and India) has cheap electricity from coal, cheap and abundant labor, and lax environmental standards. The environmental standards are really strict in Finland. Many towns here that have derelict smokestack industries, industry just went right down here or what's left is heavily automated and has a minimum of employees.

it's clear enough that efficiency gains played a small role in the decline of US oil consumption.

Well, no, it's not. First, it appears that industrial/commercial efficiencies were more important than transportation - the "other" that Gail discusses. Gail is wrong to assume "deindustrialization".

2nd, VMT has fallen to some extent because of changing preferences: young people, even if they're employed, are driving less, in part because they recognize the external costs (CO2 emissions) of driving. People are shopping online because they like it better.

3rd, substitutes like mass transit and carpooling may be considered slightly inferior (and therefore 2nd choices when gas is cheap), but that's far from TEOTWAWKI.

But what is "demand destruction"?

If a homeowner insulates, or switches from fuel oil to an electric heat pump, they're far better off. If a shopper decides to buy something on Amazon or Peapod instead of driving to the store, they're probably better off than even before prices rose.

"demand destruction" has such a negative sound.

Most of demand destruction has to do with people losing jobs--the people working in the store that is now losing out to Amazon, for example. Jobs seem to move to countries where costs are cheaper--wages lower, more coal use, etc. I would call this demand destruction pretty negative.

Most of demand destruction has to do with people losing jobs

I don't think you've done the research and analysis to support that. That's just an assumption. I'd say most "demand destruction" has to do with low value energy use being eliminated(by insulation, for instance), and low cost greater efficiency.

Jobs seem to move to countries where costs are cheaper

No, most job loss in areas like manufacturing have to do with automation and greater labor productivity.

In the short run, people changing jobs is painful (like from a local store to Amazon). But, in the long run, it's the basis of prosperity.

Finally, unemployment is a very bad thing, but it has little to do with the recent price increase of oil, and much more to do with oil companies trying to protect their privileges by destroying the regulatory power of government. They do that by forcing tax cuts on government, and trying to "starve the beast". Did you notice that the recent quarter of -.1% GDP decline was caused entirely by reductions in government spending?

Nick – “I'd say most "demand destruction" has to do with low value energy use being eliminated (by insulation, for instance), and low cost greater efficiency”. I suppose a fair question would be do you have studies to back that statement up? You may be correct for all I know. OTOH I don’t need a study to tell me that when someone’s paycheck stops coming in they cut back on just about everything including energy. Again whether that’s a big percentage of the decrease or not I don’t know. And then there’s the folks who still have jobs but see higher energy costs and cut back on energy usage…especially if they think their job may be in jeopardy. I know a fair number of upper middle class folks who have cut back on their travels both driving and flying.

Certainly insulation and other efficiency gains would help but I suspect there’s a significant time lag for that to show up compared to folks getting fired or just scared about it.

Also, I curious: which oil companies forced the govt to make tax cuts and how did they do that?

do you have studies to back that statement up?

Not on hand - I'd love to see a good analysis. US oil consumption is now well below where it was in 1979, even though the economy is 2.5x larger, and manufacturing output is 1.5x larger. It's pretty clear that in the longrun efficiency and substitution are the reasons for declining oil consumption.

More recently, I think we can be confident about heating oil reductions. Of course, oil for generation is dropping quickly in the US. Even in places like Hawaii, where rooftop PV is now much cheaper than grid power.

US industrial output is as high now as it was at the roughly 2007 peak of oil consumption, so Gail's assumption that industrial decline is the culprit for industrial energy consumption reductions is incorrect. Petrochemical companies are reducing oil inputs as fast as possible. Have you looked at the shape and thickness of plastic bottles lately?

The dynamics behind reduced VMT are more complex. VMT is being by reduced a number of things - online ordering & socializing, carpooling (which is larger than mass transit in the US), generational change. We can see in Gail's chart that VMT annual growth was declining well before the recent oil price shock.

I suspect there’s a significant time lag

Sure. short term demand elasticity is much lower than long-term.

which oil companies forced the govt to make tax cuts and how did they do that?

It wasn't oil company staff so much as oil company owners - the Koch brothers are the most visible. They've funded a long-term effort to cripple government. They don't hide that, though they like to minimize their involvement in the specifics, like funding the Tea Party astroturf, or various "free market" think tanks (Cato, etc).

Oil consumption is flattish and primary energy consumption is up about 20% or so over that timeframe which is much less than the increase in population. The missing piece of the puzzle to me is how much of the energy consumed over the years was exported (both explicit as well as implicit). I would not be surprised that in the late 70's/early 80's the US exported more "things" (with significant embedded energy) versus today. It's important to keep in mind that part of energy consumption goes towards production, something which you can see quite cleary in China for example. As the US imports more things from other countries we may seem to use less energy but part of that is because of outsourced energy use for manufacturing. And the same goes for the labor component of production of course.

Unfortunately, in 1979 the US was running a trade deficit just as it is today.

US manufacturing output is 1.5x larger now than it was then- that rules out outsourced energy use as a primary cause of the decreased oil (and other energy) consumption.

Gail wrote:
Most of demand destruction has to do with people losing jobs-- Jobs seem to move to countries where costs are cheaper--wages lower, more coal use, etc. I would call this demand destruction pretty negative.

Nick replied:
I don't think you've done the research and analysis to support that. That's just an assumption.

Now I have heard it all. There is actually someone on this list that don't believe people are losing their jobs because of demand destruction. That's just an assumption. Yeah, right!

People are losing their jobs, not only because the jobs are moving overseas where there is cheaper labor, but also because people are spending less on petroleum products. People are traveling less. That means people in the travel industry are losing their jobs. Motel and hotel workers are losing their jobs. People are eating out less. It is a different world since petroleum prices started to skyrocket in the first part of this century. (Brent price was below $10 a barrel for much of 1999.) And US oil consumption has dropped rather dramatically in the last decade. And most of that drop was due to demand destruction.

Not only that but because labor is a buyers market now, people are working for less. They have to take less or not work at all. And it was, in my opinion anyway, brought on because of the high price of oil.

Demand destruction is a very destructive thing.

Ron P.

the jobs are moving overseas where there is cheaper labor

Except, that's not really true. Job losses are primarily due to automation, and secondarily due to the collapse of the housing bubble - that's a lot of realtors, mortgage brokers, carpenters, etc, out of work because no one needs new houses right now.

People are traveling less.

Plane passenger miles only down by .-9%. As we saw above, VMT is only down by roughly 3%, and that has many sources besides reductions in "travel", including shifts to carpooling, transit, online shopping, young people deciding walk and bike, etc.


People are eating out less.

That's up by 11.5%, since 2007 - http://www.ers.usda.gov/data-products/food-expenditures.aspx

I wrote:< the jobs are moving overseas where there is cheaper labor...

You replied Except, that's not really true.

Good gracious man, are you serious? I live in a town, Huntsville, AL, where there once 13 textile mills. Now there are none. Now they, along with almost every other textile and clothing manufacturer, have all moved overseas, to Bangladesh, to Taiwan, To China, to other places where labor is cheap. Birmingham, AL, once had the largest steel plant in the South. Now it is gone.. to Japan along with most other steel plants. Most all electronic, plants like Zenith, RCA, and others, have all either gone under or moved to China and other such places. All your TVs and electronics are now made, mostly in China. Slave wages are paid.

Shoes are no longer manufactured here. Virtually all labor intensive manufacturing plants have all left for foreign shores. A few automobile assembly plants remain but not much more.

And you have the audacity to say that is not true? Goodness man, you have now lost all credibility.

Ron P.

the jobs are moving overseas where there is cheaper labor...

Except, that's not really true. Job losses are primarily due to automation

Good gracious man, are you serious?

He's correctly saying that the primary cause of lost manufacturing jobs in the USA is automation, not outsourcing. This has been widely reported for years; see, for example, here or here.

Your links spout pure nonsense Pitt. Do you actually believe that robots are manufacturing clothing in the US? Do you actually believe that robots are making shoes in the US? And there are a thousand other items that were once made in the US that are no longer made in the US, not by man and not by machine. They are made in third world countries by workers working for near slave wages.

These things, from clothing to shoes to electronic products such as iphones and TV sets are not being made by automated robots in the US. They are not being made in the US at all. They are being made in China by people. And those people work for a fraction of the wages that a dishwasher would demand in the USA.

Of course automation takes jobs. That is a given. But there are some jobs that robots cannot do. A robot cannot make a dress, or a shoe, or a hat, or put together a delicate electronic device like a cell phone. Those jobs must be done by people.

Apple supplier halts China factory after violence The factory that makes Apple's iPhones employes 79,000 people. Most of them live in a dormitory because that's all they can afford. But when you pack people together like slaves, there are bound to be problems.

Now iPhones could be made in the US if robots could make them. But they cannot so they are made in China where workers are paid slave wages and housed like animals.

And that Pitt, is why US jobs are being shipped overseas.

Ron P.

Of course automation takes jobs. That is a given.

I'm not sure the most productive method of discussion is to simultaneously agree with the main point of a position while deriding it as "pure nonsense". That style of rhetoric makes it hard to discern what you're actually trying to be serious about.

But there are some jobs that robots cannot do. A robot cannot make a dress, or a shoe, or a hat, or put together a delicate electronic device like a cell phone. Those jobs must be done by people.

I'm not sure you understand what "industrial automation" means. It doesn't mean "fire a human and put a robot where he was working". It means "give human workers better tools to do their job faster and more efficiently".

It means "give a seamstress a sewing machine instead of a needle and thread. She'll be able to get her work done 5 times faster, which means she can do 5 times as much work per shift, which means you'll be able to make the same number of dresses with only 20% as many people."

That is how industrial automation works, and that is why it's a downward force on the number of manufacturing jobs.

The fact that it's a stronger downward force on the number of US manufacturing jobs than outsourcing is interesting, but not terribly surprising if you've paid attention to the large gains in multi-factor productivity since the late 90s.

I'm not sure the most productive method of discussion is to simultaneously agree with the main point of a position while deriding it as "pure nonsense".

Jeeze Pitt, it is not "either this or that". It is not either automation takes jobs or outsourcing takes jobs, but it cannot be both. (Wrote while pounding my head against the wall.) Yes it can be both. Of course automation takes jobs and yes outsourcing takes jobs.

There is no denying that automation takes jobs. But to say that outsourcing does not take jobs is to bury your head in the sand. I gave you example after example and you ignored them. Do you deny that once everything in the textile industry was right here in the USA? Do you deny that the cotton was grown here, the cotton was spun into yarn and thread here, and the thread was woven into cloth here, and that cloth was sewn into garments here?

But nooooo, not any more. The bales of cotton that are still grown here are loaded onto boats and shipped overseas to where the mills are. Only the cotton is grown here, everything else, and I do mean everything else, has been outsourced. There was once a shoe factory just a few miles from where I am sitting right now. And there was another just 100 miles north of where I sit, in Nashville Tennessee. And there were dozens more around the USA. They are gone gone now. If there is a single shoe factory left in the USA then I am not aware of it. Shoes are now made mostly in China and India.

And it is the same with almost every other industry. It is the same with every labor intensive industry that possibly can be outsourced. Any labor intensive industry that can possibly be outsourced has been outsourced! End of story.

It means "give a seamstress a sewing machine instead of a needle and thread. She'll be able to get her work done 5 times faster, which means she can do 5 times as much work per shift, which means you'll be able to make the same number of dresses with only 20% as many people."

That is how industrial automation works, and that is why it's a downward force on the number of manufacturing jobs.

Give me the name and address of those garment factories where the seamstress can do 5 times the work per shift. They are all in Bangladesh, India, China, Pakistan or somewhere where the wage is one tenth what it is in the US. The manufacturing jobs were not driven out by automation, they were driven out by the wage differential between here and there.

And it is not just clothing or shoes, it is electronics and just every other thing that requires lots of man hours to produce. It is the wage differential Pitt, the wage differential.

Pitt, everyone knows that. You know that. My 13 year old grandchild knows that and you know that.

Ron P.

But to say that outsourcing does not take jobs...

...is not something I've ever done.

My point was simply to note and provide evidence for an interesting fact, namely that increases in manufacturing productivity has been a greater source of loss of American manufacturing jobs than outsourcing has. A greater source, not the only source.

The manufacturing jobs were not driven out by automation, they were driven out by the wage differential between here and there.
everyone knows that

It ain't so much what we know that gets us into trouble. It's what we know that just ain't so.

"Nine Things We All Know That Just Ain't So

3. Manufacturing has collapsed in the US

Most people know that manufacturing collapsed in the US, as jobs were shipped to China, with devastating effects on the once-productive Rust Belt. Thus in 1969, manufacturing accounted for 26% of national employment but accounts for only about 9% today. In reality, manufacturing output in the US is as high as it have ever been. One part of what happened to manufacturing was higher productivity. The decline in U.S. manufacturing employment is explained in part by rapid growth in manufacturing productivity over the past 50 years. Just as agriculture which once employed a third of the workforce now feeds the nation and more with only 2 percent of the workforce, so manufacturing simply needs much fewer people to produce the same output."

Outsourcing is real, but is only one factor.

Wrong. A huge chunk of the world's steel is made in China, with cheap Chinese coal. American steel can't compete with the price of Chinese steel.

China makes a lot of steel, but that doesn't mean that they stole it from the US. US production hasn't gone down much from historical levels:

Page 6 of the USGS steel report below says that in 2000 US raw steel production was 102M tons. In 2011 it was 86.4M. Thats 85% of 2000 production, and pretty consistent with the average production post-WWII. In 2000 US imports were 34.4M. In 2008 they were 14.7M, or less than 50% as large. Net steel imports dropped by 63% from 1978 to 2009:

Imports Exports Net-imports

1978 20M 2.97M = 17M

2009 14.7M 8.42M = 6.3M

Clearly off-shoring of US steel production is not the cause of declining US oil:GDP intensity.


Yes, you're probably right, although China is supplying a heck of a lot of steel, I don't know who the end users are. Never thought the steel production had much to do with reduced US oil output.

In reality, manufacturing output in the US is as high as it have ever been.

That is just not true. In dollar amount, no doubt but not in manufactured items produced. Almost all the textile industry has moved overseas. Almost all the steel industry has moved overseas. Almost all the garment manufacturing industry has moved overseas. Almost all the shoe manufacturing industry has moved overseas. And the metals industry, from steel to aluminum has been decimated by outsourcing. Yes these jobs have been automated but the automation is taking place in India and China.

Automobile assembly has remained here with but the foreign plants that are here, almost all the parts are shipped from Japan or South Korea to be bolted together in the US. I have a Hyundai that was assembled in Montgomery, Alabama and even the windows are stamped "Made in South Korea".

And about automation, call about your Visa bill and if you ever get through to a human being, they will be in India. And almost every electronic item in your house was made in China. Even the automated jobs are being shipped overseas.

Over 90 percent of the products Wal-Mart sells are manufactured in foreign facilities. Fifty years ago there was no Wal-Mart but 90 percent of the items sold at Woolworth was manufactured in the US of A as was the case in every other store, whether a hardware store, a clothing store, a shoe store or a five and dime store. Now the vast majority of items sold in any of those type of stores are made overseas.

Ron P.

Almost all the steel industry has moved overseas.

Ron, it may feel that way, but it's just not true: look at my comment just above.

Almost all the textile industry has moved overseas.

I haven't looked up the stats, but the terrible truth is that most of those plants would have closed either way. If they hadn't moved then production would have been consolidated at just a few, very productive plants.

Manufacturing of all types uses a wide variety of methods: work simplification, redesign, etc, to relentlessly reduce labor inputs by about 5% every year. If the industry matures and it's growth ends (like textiles) then employment starts dropping. It's like the shark metaphor: it either keeps moving, or it dies. Except, of course, that in this case it's only the employees that "die".

Over 90 percent of the products Wal-Mart sells are manufactured in foreign facilities.

At the height of the US post-WWII miracle, the US produced more than 50% of the manufactured goods in the world. Now, it's a much smaller fraction. In a world of international trade, the things on the shelf are going to come from places with funny names. On the other hand, the same thing is true in other countries: they see things from other countries. The US imports *and* exports.

Ask yourself: did you ever expect to see everything on the shelf of Walmart say "Made in Alabama"? No, right? Then, in a world of international trade, why expect everything to say "Made in the USA"?

Now, there's no question that the US has a trade deficit, and that some jobs have been outsourced. If other countries hadn't stolen some of our trade, we would have a larger manufacturing sector than we do. But, that doesn't change the basic fact that US manufacturing is as large now as it's ever been.

It is not a "fact" that US manufacturing is as large now as it's ever been.

I'm not sure what motivates you to continue to states things as fact that clearly are not. Perhaps you have an agenda or you just like getting people riled up. Whatever it is, isn't helpful to the conversation.

Umm..yes it is, as measured by things produced. It's not as large as measured by employment, that's for sure.

So, which do you mean? If it's the first, then please give some evidence for it.

As I stated below, the value added by the manufacturing sector has not even kept up with inflation let alone the increase in GDP. Value added is what we here in the US actually produce as part of the manufacturing process. It strips out the cost of raw material costs and imported parts.

And, how do you know that?

Here's info for you: See nice charts from a left-leaning source: http://www.counterpunch.org/2012/10/15/the-myth-of-u-s-manufacturing-dec...

and from the right: http://www.dailymarkets.com/economy/2010/10/03/increases-in-u-s-worker-p... .

Here's a good analysis of the impact of automation on routine employment in general: http://economistsview.typepad.com/economistsview/2012/11/jobless-recover...

Here's production data at http://www.census.gov/manufacturing/m3/index.html, including http://www.census.gov/manufacturing/m3/historical_data/index.html , especially Historic Timeseries - SIC (1958-2001), "Shipments".

Here's a very detailed analysis, including IT investment & data on where imports are coming from. We see in Chart 5 that output rose through 2000 while employment stayed flat. Starting in 2000, roughly when China entered the WTO, production flattened out and employment dropped like a rock.

So, China had a big impact, but not quite the impact that people think: they took the growth in production, which so that productivity growth started reducing employment.


Courtesy of the census bureau in unadjusted dollars, 1997 value added $1.826T, 2010 value added $2.185T or about 1.5% a year growth rate which doesn't even keep up with inflation let alone growth of GDP.

That looks low to me. Are you looking at durable, non-durable or all manufacturing?

All manufacturing.

Well, what I meant was that I'm having trouble duplicating your numbers. Could you point to them?

It's called labor arbitrage.

Yes, but if the market only absorbs (x) number of dresses and doesn't grow 5 times (i.e, because of expensive fuel, layoffs and an aging population), then 4 out of 5 people are laid off in your example. How many dresses can 1 person wear?

Exactly. In a mature manufacturing industry, production stops growing, and employment starts falling.

yep, absolutely right, and if was automated there would be over a billion people out of work.

Of course, a lot of US plants have disappeared. But, that over estimates the extent of the losses, and misdiagnoses the causes.

For example, the US no longer needs as much raw steel. But, most of the steel needed in the US is produced there. Heck, I have a steel mill a mile away.

US manufacturing jobs have crashed, but not output: output is up 50% from 1979, and flat since about 2001, when China joined the WTO.

What's made here? Planes, trains and automobiles (sorry, couldn't resist). IIRC, we're the top munitions/arms exporter in the world. Food products are big. There are a lot of smaller volume, specialty products. And, you should have noticed from reading TOD, a lot of petroleum products - some exported...

Of course the US no longer needs as much raw steel. But the world needs as much steel as it ever did, even more. That is because most of the steel is now used in manufacturing overseas..

US manufacturing jobs have crashed, but not output: output is up 50% from 1979, and flat since about 2001, when China joined the WTO.

Nonsense! What is the output of shoe manufactures in the US. It is a big fat zero. They have all gone overseas. What is the output of the clothing manufacturers in the US. Almost nil. They have all moved overseas. All the labor intensive jobs have gone! Output for those jobs is zero or near zero. Output in inflated dollars of some things may be up, but the output of labor intensive jobs, and those jobs still exist, is down to almost zero.

Have you not followed the Apple controversy. All the Apple products are manufactured in China at near slave labor wages. And that is the case for all clothing items. Well all items for the mass market anyway. I don't know where the top 1% is getting their clothing made. But almost every item sold in WalMart is made in China, or India, or Bangladesh, or... well you get the idea.

All cotton grown in the US used to be spun into thread in the US. All thread was then wove into cloth in the US. All cloth was then sewn into clothing, sheets, curtains, and other textile items in the US. Now the raw cotton is shipped overseas and everything is made somewhere else. And you didn't know that?

If you really do believe that manufacturing output is not down in the US of A, and I do mean way, way down, then you are totally out of touch with reality.

Ron P.

If you really do believe that manufacturing output is not down in the US of A, and I do mean way, way down, then you are totally out of touch with reality.

The US Bureau of Labor Statistics disagrees with you. Their data shows US manufacturing output rising at about 2.5-3%/yr since 1973, including at 4%/yr from 1990 to 2000. The average rate from 2000 through 2011 is about a 2.5% yearly increase in manufacturing output.

The data strongly suggests that you're misinformed on this issue.

Bureau of Labor Statistics
Are they counting hamburgers as manufacturing.

They define output as "real value added in national currency units". Presumably adjusted by official inflation figures.


That first link has a few extra letters - it should be www.bls.gov/opub/mlr/2002/06/art4full.pdf

Other than that tiny detail, very good info.

The data strongly suggests that you're misinformed on this issue.

Well no, it strongly suggests that you have no understanding of what the study is measuring. And it compares only the G7 countries and not the cheap labor countries like India and China. And it is measuring labor productivity per hour, and not manufacturing output.

In this article, labor productivity is measured as the value of real manufacturing output produced per hour of labor input.

The article as well as the table are about productivity per hour of labor not about manufacturing output. Yes, everywhere in the world automation is reducing the amount of hours needed to produce a product. And there are a lot more products being produced everywhere. More items are being produced in China, India, Bangladesh and everywhere else as well as the G7 Countries in your article. But the manufacturing jobs are being outsourced.

American Manufacturing Has Declined More Than Most Experts Have Thought

A new report released by the Information Technology & Innovation Foundation (ITIF) presents a strong case that manufacturing has declined more during the last decade than it did during the Great Depression of the 1930s. It’s gratifying to finally see a well-respected non-partisan “think tank” release a report based on empirical data that corroborates what those of working in the manufacturing industry have experienced, about which I have been speaking and writing since 2003.

One of the main points of the report is that during the Great Depression, we lost 30.9% of manufacturing jobs, but in the decade of 2000-2010, we lost 33.1% of manufacturing jobs...

I hope this report will convince the majority of economists, experts, and government officials recognize that manufacturing is truly in serious decline so that they will look at what are the main reasons: outsourcing manufacturing offshore and the economic warfare being waged by China against the U. S.

And here is the report the author is speaking of: Worse Than the Great Depression: What the Experts Are Missing About American Manufacturing Decline

In the 2000s, U.S. manufacturing suffered its worst performance in American history in terms of jobs. Not only did America lose 5.7 million manufacturing jobs, but the decline as a share of total manufacturing jobs (33 percent) exceeded the rate of loss in the Great Depression.

Pitt, there is now no doubt that you are very misinformed on this issue.

Ron P.

You know, you can both be right. Ok, we're producing more dollars worth of manufactured stuff per year. Ok, those industries left that make that really high dollar stuff (think tomahawk missiles) do it with hardly any employees (yeah, I live by a raytheon plant). Any industry that can't get by with a skeleton crew has gone overseas. Bottom line, people get unemployed, we get demand destruction, we use less oil. It's really a bit academic to me the means by which the people who would've been buying oil get the shaft. Plus, I get kinda skittish when we start talking about stuff in dollar values anyway - does a missile put something back into the world and the economy in the way that a shoe does? I guess munitions are a special case, unless you can argue the US is getting it's money's worth in Iraqi oil? But still, we're not Germany, and all those fancy machines we do still manage to make besides missiles are going right back over the Pacific to people employed making something of lower unit cost to sell back to us for more petrodollars. See, again, they're employed, we ain't. Seems to me with the shoe factory, you've got a bunch of lower wage people who spend nearly all of their earnings, making shoes for the same, the whole system supports employment. In the bomb factory, yes, the employees make more, but first, you've got the absolute minimum of them with automation, and second, most of the people employed could be called the saver or investor class, so a far smaller portion of the wages of a far smaller number of people are being recycled back into the economy (and how many of those even are H1B's sending it home instead of spending it here?). I've read 100% of every dollar spent on food stamps by the government goes straight back into the economy. Each dollar spent on tax breaks OTOH, puts only pennies back into the economy, but I digress. The degree to which it's automation vs. offshoring affecting employment doesn't seem to have huge bearing on the level of oil demand destruction we get via unemployment. Perhaps at a lower level, it's the same urge driving both offshoring and automation anyway, economists can call it productivity or efficiency of capital, or somesuch, I'll just call it by name of one of the 7 sins. Whatever you call it, it's pretty obvious that a rising tide lifts all boats in a growing economy with low energy prices, and conversely, shreds the social fabric past the point of stability in short order under a regime of a shrinking economy and rising energy prices. Since we're largely in reasonable agreement that the latter situation is the defining aspect of the nearish future, I'm going to register official unease at the prospect of a growing underclass of the newly impoverished, regardless of how high the DJIA might rise, and how many ticks Obama can cook into the GDP. While the unemployment numbers keep improving, as the number of actual unemployed keeps increasing, you've got to ask yourself, where does this cross the inflection point? Can our political and economic system really hold together a population with the income distribution of a banana republic? Banana republics, it might be argued, trend toward their typical forms of government out of necessity, perhaps. Once could forgive Ron for getting a bit worked up...seeing demand destruction in plain sight makes me incontinent. We can't all deliver pizzas and fill out healthcare paperwork for a living, and when you look at the price of in-state tuition inflation, I'm staring to doubt we're going to have many around to make missiles or high-tech machinery within a few years either (better increase those H1B quotas by a couple zeroes, boys).


No, we are not both right. Did you not even bother to click on the links I posted, or the one he posted? His link is talking about production per hour and mine are talking about American jobs and American manufacturing being outsourced. If those two links are not enough to satisfy you then try this PDF file:

What Experts Are Missing About American Manufacturing Decline

No one disputes that automation takes jobs. But manufacturing jobs are still in decline. We Americans are becoming a service economy and that is tragic. If globalization ever declines, and it will, our nation will be in serious trouble because most of the manufacturing plants have been torn down and moved overseas. We will have to start from scratch.

And next time try using paragraph breaks. Your post is almost impossible to read.

Ron P.

One place where the U.S has tremendous abilities is expertise in finding and extracting oil.

And it is measuring labor productivity per hour, and not manufacturing output.

From the very top of the second link:

"Table 1. Output per hour, output, and hours"

Total manufacturing output is indeed measured, and reported, and placed right in front of you, if you'd care to take the time to read literally two lines of my links.

the manufacturing jobs are being outsourced.

Some, yes. Does outsourcing account for all of the job losses, or even a great majority? Evidence indicates otherwise.

You'll love this chart : steel production by country


Thanks JV. Not only steel but almost everything is leaving the US. Just click on aluminum, or pig iron, or copper, or anything else on the chart. And most of it is going to China. It is going to China mostly because of cheap labor but also because of cheap energy from coal.

Ron P.

Yep, I hadn't looked at the other stuff yet, amazing amount of raw materials produced in China. have been aware and following closely Chinese coal production for over 10 years.

That's a nice chart.

And, if you look at historical stats you'll see that US production is about what it always was. China grew it's steel industry, it didn't steal it from the US.


How are you measuring output?

Nick, since you didn't answer my question, I'll take a stab at what you're talking about. Manufacturing is up in total dollars of sales like you mentioned. However, value added hasn't even kept up with inflation let alone the size of the economy which increases by inflation, increased population and increased productivity, thus your 50% in manufactured goods sales.

When you look at value added, it has fallen as a percentage of the total economy. When you consider that food products and petroleum products are two large areas of manufacturing that haven't decreased it leaves a lot of room for other segments to be completely eliminated. The 30% decrease in manufacturing employment over the last 10 years has a lot to do with the US keeping the more capital intensive industries and losing the labor intensive industries. This actually started with NAFTA and just got worse with China.

If you eliminated defense spending and housing subsides which keep two important segments of manufacturing in the US going, the picture wouldn't be too pretty.

So, don't confuse increased input costs for increased manufacturing. All you're measuring is inflation in raw materials and the cost of increased component imports.

The BLS is a lot smarter than that - they adjust for inflation.

Yes, manufacturing has fallen as a percentage of the total economy. That's what you'd expect, in a mature industry. As someone else said, how many dresses can people wear?

OTOH, yes, I'd agree that the US has lost some manufacturing growth potential due to unfair competition, and/or wage arbitrage - it's pretty clear that US manufacturing stopped growing as quickly when China joined the WTO. But, that's not really relevant to a discussion of energy efficiency: the basic point is that US manufacturing production is as large as it ever was, so losses in manufacturing aren't the reason for reductions in energy consumption.

Heh, I just visited a local furniture store in Finland, and 95% percent of the stuff was made in China.

Since then the three month average of Net Imported Products have fallen by almost 5 million barrels per day.

It looks like imports are falling below 7M bpd, for a reduction of about 6M. The US's imports have fallen 50% from their monthly peak, and even on an annual basis it's close to a 50% reduction.

Diesel vehicles are also getting better mileage, although your table doesn't say how much. There have been modest MPG improvements in heavy trucks. More high MPG passenger diesel vehicles are being sold. These vehicles were not made at all for several years while manufacturers adapted to low sulfur fuel.
I would guess that your figures for gasoline mileage are based on EPA averages for the US fleet. There has probably been a slight additional improvement due to better driving habits, with drivers getting closer to the EPA estimates.
If the (figure 10) 17% due to decline in diesel consumption broke down to 3% better mileage and 14% everything else, that would make the total contribution from better mileage 10%/49%, about 20% of the ground transportation total.

I'm sure there was some improvement in diesel mileage due to efficiency improvements too, but it is had to know how much. Trucks seem to last longer than cars, so it would seem like the improvements would feed in gradually. Of course, businesses have a motivation to buy any improvement as quickly as possible, so that would help in the other direction.

I think EPA estimates have changed, to come closer to real world conditions in recent years. There are really two sets of mileage figures around--the ones set in the CAFE standards, and the ones that appear on windows of cars. The CAFE standards are now much higher than the window sticker numbers, but at one time they were equal. This article tells more about the difference.

(I know one difference between the two MPG figures is that flex fuel vehicles go into the CAFE standards using only 15% of the real MPG, because they can theoretically be operated on a fuel mix that is 15% gasoline, 85% ethanol. In fact, they practically never are operated on this mix, but it allows automakers to include a lot of low MPG cars in their mix of vehicles, without raising the reported average. I don't know if new rules will change this.)

Yes, it is mostly due to less driving. But better MPG is (FINALLY!) happening.

Average new-car fuel economy hits record 24.5 MPG in January

Average new-car fuel economy figures ended two straight months of in January and reached an all-time record of 24.5 miles per gallon, the University of Michigan Transportation Research Institute (UMTRI) says.

People are (slowly) learning.

spec - It is a nice trend but I wonder if it's more due to folks responding then learning. Folks knew many years ago there were more fuel efficient vehicles available. In recent years higher fuel prices have caused them to respond. Just as when fuel prices fell a while back an many Texans responded by buying more p/u trucks. If we have a long period of lower prices (not very likely IMHO) I suspect that trend might not look as good.

Importantly this is a graph of all light duty vehicles (including SUVs and pickup trucks). You always have to be careful to look for that. So yes, in general new vehicles are more efficient.

This is a positive trend but I would add the following caveats:
1) there is still a long way to go; I would really take notice if this rises into the 30-40 mpg range
2) because fewer people are purchasing new cars, the average age of vehicles has increased, and the average efficiency of all vehicles hasn't really increased much; this process will take time, and only higher gas prices will accelerate it

I'm contributing to that rise in MPG. I traded in my last car that got 30 MPG for a car that I go 340 miles for each gallon I use. Of course, since it is a dual fuel vehicle (a Volt) that is slightly misleading but the reality is that next month I will have had it for two years and will only have used a little over 70 gallons of gas.

I wouldn't overlook the slow switch from expensive home heating oil to less expensive natural gas in the NorthEast. Since the switchover involves a significant capital outlay -- $10000 or so for furnace, hot water heater, kitchen range, drier, labor, materials -- it tends to be deferred until the furnace needs replacing anyway. That makes the switchover gradual. Also, many rural and some suburban houses do not have access to natural gas, but access is slowly improving -- at least here in NorthWest Vermont.

You are right. This shift has helped reduce use too. I found this source of distillate fuel by end use. (There are really more uses than I listed in the post.)


1900 is year zero (0)

Graph# 16 (black curve) is the parametrization of the Graph# 9 equation. It is the quotient of two exponential functions. The blue dots represent actual $/barrel as reported by the EIA for WTI for the years 1960-2011. The years 1980-1985 are not include in the data-set that produced the graph. The coefficient of multiple determination, R2 , which gives the relationship between the graph equation and the actual $/barrel = 0.892

The above is taken from page 24 of our report "Depletion: A determination for the world's petroleum reserve". It is a direct derivative of the Etp function used by the study.

The mean of the percent deviation ($Projected - $Actual/$Projected) is 0.000, stdv = 0.330. From 1960-2011 movement beyond the curve was exactly compensated for by later movement in the opposite direction. For fifty two (52) years crude oil prices have, on average, exactly followed the curve.

Oil demand is falling because prices are increasing, and the price will continue to increase for the duration of the oil age!

What happens if governments fail indirectly because of the high price of oil --people are laid off from work, can't pay taxes, and need more benefits. Doesn't that create a problem?

It seems with the inflation-adjusted gas price curve what it tells us is to what extent oil can substitute for money. Way back in time it was a novel deal and that's why it had a relatively high price tag. Then it went through a period of plenty, and it was plenty cheap. Now it is back to being closer to a luxury item as when it first came about.

Interesting idea!

Perhaps a small contribution to the decline is a reduction in discretionary and recreational use of fuel. I live in an area where recreational use was high; not so much now. Fewer boats and jetskis on our TVA lake, fewer superbikes on our mountain roads. The mega toy store in town (watercraft, motorcycles, ATVs, etc.) closed a while back, and they were a major manufactures' outlet. Marinas that had a waiting list for berths in '05 are now offering specials. Progress, IMO, though painful for some. A couple of friends lost good jobs at the dealership: knock-on effects of peak oil and, locally, a real estate crash; all systemically linked.

I live in an area where recreational use was high; not so much now. Fewer boats and jetskis on our TVA lake, fewer superbikes on our mountain roads.

Good riddance! I use a ATV on the ranch, but will be glad to finally see the demise of these environment destroying vehicles.

Lots of factors, to be sure. And CC has its impact, which can work in both directions. My nephew works at a marina on Lake George in my home turf of NY's Adirondacks, Boating season was traditionally Memorial to Labor Days. Kinda chilly on the water outside those dates, and ice-out sometimes didn't occur 'till early May anyway. Now, not so much. Winter of '12... what winter? No ice. Marina opened on April 1st, the classic Mother Nature April Fool's prank. All slips full every year so far, and the # of boats they handle for storage off-site goes up every year. As the climate warms, those who can afford it are expanding play time. I see this as similar to the oil and other resource extraction co's drooling at the thawing Arctic. If it becomes accessible, we mechanized humans will go there and burn fuel, be it for play or for pay.

Two years ago I was driving the smallest pickup I could find with any towing capacity, a Ford ranger with V6 motor. It averaged 18 mpg. I sold it and bought a Mini Cooper. The Mini consistently gets over 30 mpg and by comparison is a joy to drive and especially park. I recently calculated that I could rent a full sized pickup for 14 weekends per year( at about 30 miles per rental) for the difference in gas mileage.

I will probably never own another pickup truck.

I recently calculated that I could rent a full sized pickup for 14 weekends per year( at about 30 miles per rental) for the difference in gas mileage.

Exactly. More people need to figure this out. Especially with carsharing programs available. And every Home Depot has a truck that you can rent for quick jobs.

I would add into the de-industrialization cause the virtualization of corporations. 5 years ago my wife and I both worked out of conventional office buildings some miles from our houses. For the last 4 years we have worked out of our homes. We have 2 cars, one new car (less than 2 years old, 33 mpg town and up to 40 mpg highway) does most of the limited mileage that we now drive, and the other (older and paid for years ago) car is more or less a backup and occasional use vehicle. Our travel costs and fuel consumption are a lot lower than they were 4 years ago.

What about your home heating and air conditioning cost. Since you spend all that working time at home, it might have increased a lot?

Hi Gail,

Unfortunately, new CAFE rules may not have as large an effect on overall consumption as it first appears. There are numerous loop holes and unintended consequences, in particular regarding Pickup Trucks, which are still around half of all private vehicle sales in the U.S. Here is an article that I thought did a reasonable job of explaining the complicated rules and their effects.


Thanks for the link, it certainly explains some of the strange results that come out of the US. The PT Cruiser a truck? LOL

To add to a conversation on DB a few days ago concerning small hatchbacks not being economical on fuel due to aerodynamics. It is interesting that under European regulations, the result has been small hatchbacks while the US regulations due to their square foot component have encouraged larger cars/trucks. So add a trunk on a hatch which adds several square feet and allows which gives a great advantage the company's CAFE standards.

It may explains why the US makers don't push/supply hatches!


Fuel economy targets are a function of a vehicle’s footprint; the smaller the footprint, the tougher the standards are. A car such as the Honda Fit, with its footprint of 40 square feet, has to achieve 61 mpg CAFE, or 43 mpg IRL by 2025 to comply with regulations. At the opposite end of the spectrum, a full-size truck like the Ford F-150, with a footprint of 75 square feet, only needs to hit 30 mpg CAFE, or 23 mpg IRL, by the same timeframe.


When examined side by side with European emissions standards, the economics of CAFE become more transparent. EU are relatively straight forward by comparison. Tailpipe CO2 emissions are measured and a de facto consumption tax is levied based on a vehicle’s output. There are no footprint formulas or regulatory loopholes that can be manipulated

That link goes a long way toward explaining why the compact pickup trucks disappeared from North American showrooms, despite the fact they are running around Europe and Asia in large numbers. It's all about weird government rules that encourage auto makers to build only full-size trucks - and the auto makers are fully onside with that agenda because full-size trucks and SUVs are where they make the most profits. The idea of basing the fuel economy requirements for a vehicle on its square footage is just bizarre but works to the advantage of auto makers who want to sell mostly big vehicles.

Unfortunately, it is putting the consumers buying full-size pickups as commuter vehicles into a trap, and the lid will snap shut on them sometime in the foreseeable future. I have freaked out some people on TOD by talking about $12/gallon gasoline, but its day is coming. When it does, a lot of the big pickups people are buying will still be on the road, but only the rich will be able to afford to drive them to work. The poor will not be able to afford the gasoline to drive to work, but they won't be able to afford to buy new vehicles, either.

I'll probably buy a nice cheap used pick-up when that happens. Yeah, the 'gas guzzler bubble' will eventually pop and there will be some nice used low MPG vehicles available as lots of people scramble to sell them in order to buy a small hybrid (or hopefully a plug-in hybrid or pure electric).

the auto makers are fully onside with that agenda because full-size trucks and SUVs are where they make the most profits

Absolutely. As is standard in the US, the industry writes the regs, the gov't rubber stamps 'em.

I have freaked out some people on TOD by talking about $12/gallon gasoline, but its day is coming.

You've gotten disagreement, because in the longterm that's not realistic. There are many substitutes for oil that are cheaper than that. EVs, etc.

Ultimately, synthetic fuel (using renewable power for electrolytic hydrogen, and CO2, both from seawater) would be cheaper.

Now, if the Straits of Hormuz close suddenly, we could see a spike...

$12/gallon gas is still possible though. It might take much longer though. Even if all the cars switch to batteries (or fuel cells or natural gas or whatever), there are going to be some applications that still require it. Long haul transportation, aviation, ships, etc.

Some places are close to $12/gallon in Europe but that is of course the taxes.

That's where the synthetic liquid fuel comes into play.

Right now it would probably cost $10 per gallon, but with production experience and engineering improvements it would probably come down to $5.

If there's a lot of cheap surplus wind & solar, the price could be even lower...

The problem is getting hydrogen for synthetic fuels at large scale. Only natural gas could supply it relatively quickly.

Electrolysis of water (probably seawater), using renewable electricity (probably surplus. That's the source of 4% of hydrogen production right now.

Which is very small - electrolysis isn't used to create hydrogen on a large scale from renewable energy. This is the breakthrough needed to make hydrogen fuel cells for electric cars. The way I see it Li battery production won't make a dent in replacing gasoline- and diesel-powered vehicles until 2030 or later. Natural gas can be used to make hydrogen, but this still relies on non-renewable natural gas.

1st, 4% of the industry is not really small - it's very much a proven and time-tested technology at industrial scales. 2nd, Electrolysis isn't used to create hydrogen on a larger scale because most of the time it's a little more expensive. That doesn't mean it won't work well when natural gas is unavailable.

I doubt H2 fuel cells will be used in electric cars: batteries are much cheaper, and very likely will continue to fall in price as fast or faster than fuel cells.

Li battery vehicles could ramp up quickly, if we as a society chose to do so. Right now, we're effectively subsidizing oil - it should be $7/gallon in the US. At that price EVs would grow very quickly.

Nick, for a good summary why we won't see hydrogen being used for transportation on any reasonable useful scale, I urge you to read chapter 4 of "The Last Oil Shock" by David Strahan.

"The way I see it Li battery production won't make a dent in replacing gasoline- and diesel-powered vehicles until 2030 or later."

People are getting real world gasoline mileage in the Chevy Volt in the 100's (discounting the electricity, of course) - Even motorhead Jay Leno has 18,000 miles on his with a 1,200 mpg average. For each Nissan Leaf pack you could alternately have two Chevy Volt packs and that would probably make a faster difference. So Li battery production certainly does have the potential and probably will make a dent in at least passenger car fuel consumption.

I think the current European price is $8-10 / US gallon. 2/3 of that is tax, which is recycled in the economy. If fuel wasn't taxed, something else would be. If fuel was $12 before tax, it would be a huge burden on our balance of payments and would cause finanancial collapse or hyperinflation. Err... we are not far off that now.

Well, $4 fuel has already caused a 45% drop in US oil imports. $7 fuel in Europe means that European personal fuel consumption is at 18% of US levels. $12 oil would pretty much eliminate oil consumption.

That would be a good thing all around.

It would mean virtually the collapse of industrial economy in western countries.

$4 oil has caused a 50% reduction in US oil imports. $7 oil in Europe kept personal fuel consumption at 18% of the US & Canada. $12 oil would make users go to EVs and a host of other substitutes.

no, it resulted in this :


On another note, most of Spain is in severe drought.

No, that was caused by a housing bubble (just like in the US), in part caused by a badly managed Euro.

It's very, very hard to unite currencies and not unite economies. It was a big cause of the Great Depression in Europe.

You think construction material is moved around by horse and carriage ?

You think construction material is moved around by horse and carriage ?

As an old railroad engineer I knew said, "Trainwrecks seldom have only one cause." World oil cost increases + US federal and state government fiscal crises + US dollar devaluation = $12/bbl gasoline. Wait for it coming to a gas pump near you.

Well, I am assuming adjustments for inflation.

But, US dollar devaluation wouldn't make any difference: batteries, wind power, synthetic fuel: they'd all be domestically produced, so exchange rates wouldn't matter.

Sure, but have you considered how much hydrogen would need to be electrolyzed ? That would need a heck of a lot of electrodes that use rare earth metals, which are also used in magnets for electric cars and wind turbine generators. Lithium and cobalt (in batteries) and neodymium (for strong magnets) aren't in tremendous supply. While electric cars are coming on the market, it doesn't seem like their production will ramp up tremendously. I could be wrong though, and I'm not privy to industry secrets regarding potential lithium, neodymium and cobalt production.

Typically natural gas would be used to make gasoline or diesel in large quantities, as it supplies the hydrogen. Of course that means you need a lot of natural gas.

electrodes that use rare earth metals

Cobalt isn't essential for li-ion batteries, neodymium isn't essential for magnets (many EVs and wind turbines don't use it). Lithium isn't rare.

What rare earths are essential for electrolysis?

Cobalt and platinum for electrolysis to produce hydrogen. Electrodes don't corrode during electrolysis.

This article is an excellent look at corrosion in general, see the section under corrosion and technology.


Keep in mind that we're talking centralized, industrial electrolysis, conceptually similar in style and scale to the aluminum industry. That's very different from the concept of decentralized H2 production and consumption often discussed for fuel cell vehicles. It would be orders of magnitude more efficient in it's utilization of capital, materials and labor.

I don't see a reason to think that there will be a shortage of materials for this kind of operation.

A minor point - neither cobalt nor platinum are rare earths. Of course, rare earths aren't really rare.

Platinum is certainly a rare earth.

Lithium production is small. Li isn't rare, but it's not like you can go just anywhere and extract it. Cobalt is used in almost all current li-ion batteries and NiMH batteries, where the "M" is metal. Current wind turbine generators use Nd-Fe-B permanent magnets to achieve good efficiencies and reduce maintenance .

Lithium production is definitely the limiting factor in battery production now, i.e, http://www.bloomberg.com/news/2012-09-19/lithium-boom-spurs-production-f...

According to that article, don't look for significant availability of electric cars before 2020.

Several major EVs (Volt, Leaf) don't use neodymium or cobalt. Some, but not all wind turbines use neodymium permanent magnets - the industry isn't dependent on it. It's convenient, not necessary.

A lot of motor and generator manufacturers (including GE, GM and Toyota) are quite annoyed at China for recently constraining their exports of rare earths, and are working hard to make them obsolete - especially neodymium. I wouldn't underestimate them on such things. OTOH, if the unlikely event they fail, they can just go with alternative designs that aren't quite as convenient, but work quite well.

Regarding lithium - keep in mind that currently lithium's cost is a small fraction of the cost of batter production - recent price increases haven't been significant.

That Bloomberg article doesn't say anything about lithium constraining EV production - the main concern expressed is about oversupply.

No, I can tell you battery supply and capacity is the major constraining factor to EV adoption - that and the high entry price and limited range doesn't make a new EV compare favorably to a cheap old internal combustion powered jalopy (used vehicle), which is more and more favorable as take home incomes drop. GM, yadda, yadda has to take what China has because there is undoubtedly lithium around in the US somewhere, but nobody is actually mining it. As a matter of fact, since the batteries are fairly light these days I don't know why the battery makers didn't just increase the capacity 50% or so, as that would really make EV's more attractive.

Thanks for the link. The devil always seems to be in the details, and rules aren't what they appear to be.

There is also the issue of what kind of vehicles are deductible for business purposes. I discovered that if I had a small actuarial business, I could deduct expense related to a heavy vehicle (like an SUV or truck), but not related to a regular car. There is no earthly reason why I (or anyone else operating a light small business) would need such a vehicle, but the tax laws were put into place, apparently to help the sales of US-made heavy vehicles.

The tax laws were created to encourage general business investment.

The SUV loophole was created by undue influence by the car industry.

Gail said:

What happens if governments fail indirectly because of the high price of oil --people are laid off from work, can't pay taxes, and need more benefits. Doesn't that create a problem?

Following our graph, which we are 99% confident is accurate, oil prices by 2020 will be about $208/barrel, or $6.88/gal for transportation fuels. This is probably survivable, but by 2025 those prices will have advanced to $329/barrel and $10.90/gal. At some point the energy provided by a unit of fuel can no longer support the economic activity needed to acquire it. We have some graphs that address that issue, but in the final analysis it becomes an economist's job to define it(we're engineers).

Reviewing some of the other work that you have posted here, however, I would think that the impact would be significant (to the say the least).

The Hill's Group

99% confident? Wow! Please explain. If your model is that good, you make a killing in the futures market. And maybe you are.

Maybe they take Yergin's latest comments and assume that the opposite is most accurate.

Did you post a link to your graph?

When you make prognostications, you also need to look at the alternatives. The discussions above point to shifts in not driving, buying higher mpg cars, giving up gasoline consuming recreational vehicles, walking, riding a bike, and changes in technology such as going to battery electric vehicles.

Bill Moore of EV World talked with the director of the Toyota Museum and during the converszation, the director mentioned that the CEO talks with the CEOs of oil companies to get a sense of gasoline prices in the future much the same way the Hill's Group is prognosticating future crude and gasoline prices. Toyota talks a long view and tries to plan for those eventualities. The CEO mentioned that "If they get it wrong, they go bankrupt." The Prius was the result and efforts are on their way to create plug in hybrids.

I too am looking forward. Today I drive a Prius. Tomorrow, I will likely drive a hybrid with around town or around the area all electric capability or maybe an all electric vehicle and rent a car and ride public transportation for longer distances. I could even see giving up a car. I just finished installing a second set of PV panels. I view using fossil fuels as detrimental and an increasing cost in my upcoming retirement.

All this will likely eat away at increasing prices. However, there will be some things that we will need fossil fuels for and some of those things will be for heavy machinery at remote locations.

As a side note, I have been on this site for 7 years as of yesterday. There are no words that can fully express my full gratitude to you all for your time and efforts and the priceless education that you have provided. Long live the TOD!!!


There's scope for wringing out more mechanical efficiency out of diesel/gasoline powered combustion engines, i.e, through a turbocharger or changed compression ratios. A lot of diesel powered vehicles sold these days in Europe.

In the longterm that's not realistic. There are many substitutes for oil that are much cheaper than $10. EVs, etc.

Ultimately, synthetic fuel (using renewable power for electrolytic hydrogen, and CO2, both from seawater) would be cheaper - maybe as cheap as $5/gallon, certainly less than $10.

Now, if the Straits of Hormuz close suddenly, we could see a spike...

Currently methods of electrolysis of water to produce hydrogen use electrodes using platinum or cobalt, very expensive materials.


Note the statement that the most recent attempts to produce hydrogen via electrolysis (i.e, HT-PEMEC) still use noble metals to carry out the electrolysis, so this can't provide hydrogen for large scale coal-to-liquids (CTL) as an alternative to CTL using coal and natural gas.

A brief internet survey doesn't reveal any current electrolysis method to produce H2 on a large scale that doesn't rely on expensive and rare platinum or cobalt, although there is some talk about using carbon electrodes (of some variant of carbon). A breakthrough here would be helpful.

I think that the link you provided refers to a relatively unusual, specialized kind of electrolysis. I don't think industrial electrolysis, the kind used to produce almost all aluminum, or 4% of current hydrogen supplies, uses platinum, or even cobalt (which is much cheaper).

The kind of electrolysis that you found in that link is on the cutting edge - I believe it's designed to raise efficiency.

See http://en.wikipedia.org/wiki/Electrolytic_cell

Please explain where consumers will get the money to pay for this high-priced oil. Will they stop buying everything but food and oil for their vehicles?

I put up a new post on Our Finite World related to this issue called, Our Investment SInkhole Problem.

That's exactly right, they won't. If they're smart, they'll put in an order for a plug-in vehicle (new or used), and carpool till it's available.

If they're dumb, it will take a little while to figure this out...

A while ago every second post you made you said all that needed to be done was "just buy a Prius". It was your cure for everything including economic collapse, suburban sprawl, peak oil, climate change and overpopulation.

Yeah, now I say "buy a plug-in".

Our options are getting better...


On the one hand, that was a metaphor for the idea that there are solutions here.

OTOH: EVs (partial and full) really are a solution to about half our PO problems. They also help with CC, as they integrate beautifully with wind power.

You mean where will *our* consumers will get the money to pay for this high-priced oil. You suggest demand destruction will keep it from happening? I don't necessarially disagree, but we only use, what, 1/4 or 1/3 of the world's oil? There are others out there who no doubt can get $300/bbl of utilty out of that oil, GNE-wise. TOD has provided one of my favorite anecdoes some time ago - who's gonna buy the last barrel of oil: the lady working at walmart who commutes 30 miles each way alone in a suburban, or the kid crammed into the 20-person minibus with the 40mpg turbo diesel that travels 10km to work with pickups and dropoffs along the way? I agree this all presumes some funtioning economy somewhere so some user can buy the expensive oil, but I can't rule out the possibility of oil getting expensive due to depletion faster than demand can be destroyed. If all world fields started showing a 75% decline rate next year, I'd think there'd be some period where alot of paper was chasing a few of them last barrels...the 1% still seem to be doing pretty good on paper as our middle class hollows out. They could afford quite an impressive price to run their jetskis a few more laps it seems. I guess it's a long, slow race to the bottom no matter how you slice it. Given the sawtooth we're seeing on the way down, it certainly seems we're at equilibrium between oil price and employment (or maybe oil *value* and employment, and the dollar price is simply a bunch of numbers on paper given how much currency manipulation is going on globally). Gotta hand it to the oil sands and fracking folks, they are sure keeping the price in an impressive territory, given how much quantitive easing should be pushing the price up (I guess, conversely, if it (QE) ain't pushing the price of oil up, it's probably not pushing the price of equities up much either).

The big take-away for me on the subject of US demand destruction and tight oil boom and the subsequent plunge in imports, what, some 6 mb/d?, is what would the price of oil be if these two events had not occurred? Without the decline in US imports the price would be clearly very much higher than it is now causing who knows how much damage to the world's economies.

Proof if ever we needed it that we're on the plateau of the global Hubertian curve. A knife-edge really.

It will only take one big above ground event in the producing countries or surely a few more years (?) on this uncomfortable spike to find out......?

westexas said:

Did you post a link to your graph?

Yes, but here it is again. See post above


Maybe they take Yergin's latest comments and assume that the opposite is most accurate.

We tried that; like the rest of his projections - even that didn't work!

The report is not published yet, but to make a complex subject more complex, the Etp model is a Second Law statement. It is derived directly from the "Energy and Entropy rate balance equations for control volumes" which can be found in any thermodynamics textbook. Because it is based on the First and Second Law, and correlations to historic price and production data sets exceed an average of 95%, we are 99% confident.

We also have a model that is derived from Statistical Thermodynamics that ties the cumulative production distribution to the distribution of molecular weights of petroleum. Whether we publish all of this with this release is what is slowing things down. Right now it is 50% for: 50% against.

The Hill's Group

Gail (or anyone else on this thread), do you have any insight into EIA's decline profile information for their World Energy Outlook? I've been in dialogue with EIA for a while now trying to get this information, which seems necessary to build their forecasts, and yet they are refusing to share this data with me. They even say they won't share it with a FOIA request. This strikes me as fishy but I don't want to assume anything before I learn more. The reason I'm seeking this information is that their WEO 2012 oil forecasts seem very rosy given the fact that we're seeing extremely high decline curves (profiles) in unconventional fields like Bakken.

I meant EIA's Annual (not World) Energy Outlook

If you have the money, you can get more data.

I don't have the money, so what I do is take the data that is available and apply models of oil depletion to extrapolate to the future. It does work.

Tam – You hit the nail square on the head IMHO. I’m presented with models all the time: production decline, geological/geophysical, drilling economics, etc. I’ve pissed of more than one presenter by refusing to look at their model unless they first show me the entire list of the assumptions used to create it. Models are never incorrect: they create a valid answer dictated by those assumptions. It’s those assumptions that must be validated. I’ve done hundreds of different models in my career and in every situation I could generate positive/negative conclusions by selecting different assumptions. As a consultant I often had to reverse engineer a model to select the assumptions needed to get the results management DEMANDED.

Many folks never look at the assumption tree. They just look at the results and either accept or reject the model depending on whether it matches their preconceived ideas. Know that I understood the potential negative effects of AGW decades ago. Today we are inundated with models showing how bad this or that will be in the future. And it seems many accept those models because they agree with their positions and never evaluate the assumptions used to create those models. Most of these models may be valid. But many just accept them without knowing the assumptions. Same true for the denier side of the debate.

That's not science. It's group think.

I often had to reverse engineer a model to select the assumptions needed to get the results management DEMANDED.

When that kind of thing happens to me, I put the assumptions (especially the flakiest ones) in the footnotes.

Always check the footnotes...

Nick - Unfortunate footnotes are easily removed before distibution. LOL. Actually a couple of times before I released the data I made the company sign paper pointing out my actual recommendation. Needless to say it pissed them off and I wasn't invited back. Which was OK since I scratched them off my list.


I give my reports with complete information in the footnotes and appendices - if someone wants to select portions and put their name on the result, that's their karma.

I have worked with models way too much myself. After a while, it is easy to become very cynical about them. They are no better than their weakest assumption.

I appreciate the feedback but no one's shed any light on the actual decline rates EIA uses, which was my question. I've still had no luck getting this data from EIA and it seems particularly important now that a significant portion of our domestic production is coming from tight oil, and with that proportion projected to rise to about 50% in the next few years.

It would be nice to know what they're using, though it's unlikely to be helpful in actual forecasting.

No one really knows what's going to happen - the current tight-oil boom was completely unexpected, and EIA's forecasting is highly unreliable.

I agree we can't know with great certainty what's going to happen, but the recent EIA AEO is the first official support for the "shale revolution" in the US and was cited countless times for what I feel is the highly specious idea of energy independence for the US. http://www.greentechmedia.com/articles/read/guest-post-the-future-of-ene.... If EIA is using highly optimistic decline rates, it throws their entire modeling effort into doubt.

Well, decline has always been with us, during periods of growth production as well as periods of decline. One post on The Oil Drum a little while ago confidently predicted a cap of 200k bpd from the Bakken due to those high decline rates. No One Knows.

OTOH, I think US energy independence is very possible - the US could do it without any growth in production at all, just by reducing consumption. The US has already reduced imports by almost 50% from their peak. Please note that the imports you referenced in your article were gross imports, not net imports - net imports are much lower, at 6.698M bpd for the latest month: 50% down from the monthly peak of 13.442M bpd. http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=mttntus2&f=m

I agree with the general thrust of your article: we need to reduce oil and FF consumption dramatically.

June 13, 2012 - High airline jet fuel costs prompt cost-saving measures

While efficiency has increased between 2005 and 2011, the number of flights has declined over that period. These two factors combined have put downward pressure on jet fuel consumption. In fact, jet fuel consumption by U.S. airlines has dropped from about 18 billion gallons from 2005 to 16 billion gallons in 2011. Even with declining jet fuel consumption, however, jet fuel expenditures are up as a result of increasing jet fuel prices.

I guess that jet fuel is in the "other" category, although 2 billion gallons/year is only a savings of 130,000 barrels/day.

That's a decline of 11%, which is consistent with the overall decline.

It's worth noting that flights have declined, but not passengers - that's another kind of efficiency.

I'm not sure if you realise that gallons of jet fuel and oil aren't equivalent - only about 7.5% percent of a barrel of oil gets turned into jet fuel, although that value can be changed.

Now look at this graph (http://www.indexmundi.com/energy.aspx?product=oil&graph=production+consu...) - just what is wrong here ? How can oil consumption be that much higher than oil production (ans : obviously, it isn't).

If you wonder why the airlines are in trouble - then the historical graph of jet fuel price explains why :
In 1995 jet fuel was as low as 0.47 cents a gallon and it hit 3 dollars plus in 2008.

Indian and Chinese jet fuel consumption, look at the table, not the graph:

Ok, maybe indexmundi isn't very accurate (the total oil production and consumption obviously isn't correct). .. but the trends are clear.

Oil consumption can also be reduced by wise public policies - an option that the USA has not yet tried. However, Denmark reduced oil consumption by -21.2% in a decade and France -11.2% through public policy choices. And even steeper declines can be predicted in both nations.


Best Hopes for Wiser Public Policies,


I agree that US public policy could be greatly improved. That's not due to incompetence, or to ignorance - it's due to desperate resistance from legacy industries with a lot of money to spend to buy influence. France doesn't have large FF industries to push back (Denmark does produce oil - are there oil companies headquartered there?).

OTOH, the US isn't doing nothing: wind and solar are being pushed moderately well at the national and local levels. The improvement in CAFE regulations is real and valuable, and the push to EVs is a good start.

The US did reduce oil consumption by roughly 10%, and oil imports by almost 50%, in the last 5-6 years: that's not so bad.

We could do much, much better on the rail side, no doubt.

This isn't difficult in Denmark, small country and Danes ride bicycles. You can cycle across Denmark in a couple of hours.