Go ahead and drive less

Today, the New York Times had a slightly fluffy but still interesting article called Go Ahead and Drive Less, if You Can. I'd been hoping to see a statistic about whether Katrina and high prices in general led people to decrease their driving after Labor Day even more than usual, and here it is:
"Normally we'd expect to see a decline of about 400,000 barrels a day from August to September just for seasonal reasons, as people stop taking vacations," said Doug MacIntyre, a senior oil market analyst for the Energy Information Administration.

But Americans consumed an average of 8.8 million barrels of gas a day for the week ending Sept. 16, down from 9.4 million the week before Hurricane Katrina struck New Orleans and roughly 200,000 fewer barrels per day than in mid-September last year.

So, will it last (assuming prices stay at $2.70+/gallon?)

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I've noticed that the bicycling newsgroups/forums have a few people asking about how to carry groceries on their bikes (racks an panniers vs. trailers), and a few people celebrating "car free" status.  We probably can't read too much into that.  We are a sub-group that notices that a) we are already riding bikes, and b) driving is less desirable these days.  FWIW.
A gas price of over $3 makes an impression which a price of $2.75 does not. Unless prices go back up I would expect demand to increase again.

Gas "demand" levels (really, amount of gasoline shipped to the ends of the pipelines) are plotted at http://tonto.eia.doe.gov/oog/info/twip/twip_gasoline.html#demand and updated every Wednesday. It will be interesting to continue watching this and see how consumption levels change if prices stay below $3.

Through all this turmoil "demand" only dropped by 200,000 bbl/day above and beyond what is considered normal??

That's probably about as much as was shut in by refinery outages. No doubt at least some reduction in "demand" (shipments) is as a result of outages plus other factors as noted.

Still a 2.22% decline is fairly substantial; Jet fuel demand growth has also been dropping for the last several weeks - fairly steeply.

I keep hearing all these ancedotes about people driving less, etc but I think in reality it's a lot like dieting. One day you resolve that you are going to eat less and you do, the next day you probably still muster enough will power to keep your word, but over time you make little excuses (I need it, I deserve it, etc). By the time you look at the scale, you have actually gained a little weight, even though you claim to be "on a diet". Let's wait to see the data before we believe the ancedotes or polls saying people are driving less.

You have to make wholesale changes to your life - sell the SUV, buy a compact car/hybrid, carpool, combine trips, bike/walk more, move closer to work, take mass transit, etc. You know the drill.

How can selling your SUV save the world any gas? You must be assuming that the new owner will drive fewer miles than the old owner. Where is the evidence that used car buyers drive less than new car buyers? The solution to the SUV problem is not buying new ones.
Right, so if you flood the market with used SUVs, that will naturally make new SUVs less appealing - they get recycled.

But what I was really suggesting was that if individuals want to be less exposed to higher gas prices, those are ideas on how to reduce it, but it works at a national/global level too.

If you sell your SUV, the buyer may be one who was considering a new SUV. Also, if the market is flooded with SUVs, this drives down the resale value of SUVs, and indirectly, the amount people are willing to pay for new SUVs, thus decreasing the profit auto manufacturers realize from SUVs, thus prompting them (maybe) to build fewer SUVs and to build a greater number of fuel-efficient vehicles.

Agreed, the effect is small, but if enough people do it, it is there.

I consider myself and family early adopters of a car-free (or in our case, a car-reduced) lifestyle. We got into this some years ago and have made choices to reduce our need for transportation, but have also taken it a step further and equipped ourselves with tandem bicycles for ourselves so we can travel to and fro with our kids.

I mention this to underscore that we are very aware of who is doing what in our extended circle of friends, families and colleagues. Leaving out the dedicated bike folks, who were all dedicated bike folks at 20 and 30$/bbl, the only perceptible change I've noted in "regular" folks is that a few are walking their kids to school on nice days instead of driving... but rarely, and not as a result of higher prices.

I'm sure the recent rise in prices, and the talk about supply and demand over the past year or so, has triggered more than a few like-minded folks to at least consider alternatives, but I'm willing to bet, based on our experience, that very few have taken substantial measures to change their energy impact.

The poor and those who were already living on the edge of their paycheck? Yes, I can see them trading in a car, if they had one, for a bus pass, if their work/life situation allows for it.

But for the vast majority of middle-income suburbia it seems that changing attitudes stops at grumbling unless there is real hardship thrust upon them.

Higher prices have a way of causing immediate reduction and grumbling, but over time, people get used to them. Dramatically higher prices might change attitudes, but I wonder if we'll be fortunate to experience that... more likely, if Peak Oil is arrived at through a series of plateau events, we'll keep going through these shock-grumble-acceptance-use more cycles.

What would really work to change attitudes... is actual shortage.

PS: overnight, energy futures are on the rise again. NG X contract is actually a tad higher than Friday's close; both X and V contracts rose from today's lows on somewhat higher volume than today's decline showed.

There may be some sellers who wished they didn't. We'll see.

I'm a bit confused by this... you seem to assume that if prices go up without actual shortages, we'll inevitably be making things worse.

But... suppose prices go up to $90 per barrel and stay there for two years, then ratchet up to $100 for a while, $110...

Sooner or later, in that scenario, alternative energy will start coming online. And it won't all be carbon-heavy fuels. If we can hold out for ten or fifteen years without shortage, while prices stay high enough to make other forms of power profitable, then we may have enough technologies (worthwhile solar cells, better batteries for plug-in hybrids, etc.) to actually reduce our oil demand.

As long as I'm being optimistic, I'll suggest that we might even be able to increase our energy supply without increasing our carbon consumption. Tar sand and coal liquefaction will never be all that cheap, and there may be some exciting stuff happening in solar (reel-to-reel solar cells) and even batteries.

But, back to pessimistic... I really don't like what I'm reading about Ghawar, and the "if we can hold out for ten or fifteen years" doesn't sound all that likely to me.


you seem to assume that if prices go up without actual shortages, we'll inevitably be making things worse.

Yes, that is a distinct possibility, but whether consumers make big personal changes in their energy consumption habits  (and therefore business will have to adapt) depends on the RATE of change, not the absolute change,

I remember when price moved to 34 cents a litre (I'm in Canada) and at the time we felt it was robbery. Then 50, 60, 70... and a nice break back to "cheap" gas at 45 one summer. What a treat. Now we consider anything under a buck a litre "cheap".

Its all relative. After all, SUV's have been huge sellers for the past decade while energy costs have trended ever higher. The recent rate of change has picked up - that is what is causing all the handwringing and angst, not the price levels themselves.

I won't be surprised if we consider 1,20 a litre or 3.50 a gallon "reasonable" 12 months from now. When consumers get used to a price, they keep on buying, and all historical trends show consumers keep on buying.

The one fly in the ointment is that prices are back to inflation-adjusted OPEC embargo levels, but the pundits are doing their job, reminding us all that oil is a much smaller component going into GDP then it was back then.

By the way European markets are ramping up early this morning - huge, almost unheard of moves - all on "Rita", it sure would be a cool day for a bit of "surprise" bad news once Europe closes.

US market index futures are not up as strongly ahead of the open but at the current levels there will be a gap up open and then.. who knows.

I'm sure markets will hold up until more detail is known and if the conclusion is "what me worry", well, its up in broader markets, down in energy, until something else clouds the horizon.

Seems a bit otherworldly out there today LOL.

I would take the gasoline demand number quoted there with a grain of salt.  EIA primarily collects data on primary storage for oil and gas. Given all the disruption from Katrina and now Rita, there clearly has been a lot of fluctuation in aggregate secondary (gas stations and the like) and tertiary inventory levels (i.e. your gas tank), more than enough to mask the real changes in demand.  It will take a little more time to assess how much demand has really fluctuated, either due to seasonal factors, higher prices affecting usage patterns or the weather events themselves. but that 8.8 mbd demand number may or may not be indicative of anything longer term.
I wouldn't read too much into short-term numbers.  We all talk about how inelastic gasoline demand is in the short run.  Well, we're still quite clearly in the very short run.  

If you want an indicator of how spooked people are by gas prices, wait for the first few days of October, when the car sales figures for Sept. come out.  I've seen a few sporadic reports (without actual numbers) saying that sales of SUV's and pickups have flat-lined.  If this is true, and if the numbers show people moving to smaller vehicles, then we have a strong indication that drivers are actively looking for ways to conserve fuel.

Personally, I expect to see sales WAY down across the board (more so on the less efficient models), as people will be scared enough by price volatility to avoid making a major vehicle purchase or lease.

Lou--will you remind me/us of this if I don't remember to post it come October?
This is a very good point, and is probably true.  One thing that really caught my eye is Bill Ford, Jr. this past week calling for an automakers/US gov't summit about promoting fuel efficiency.  Now I don't know if he had that on his agenda for a while, but the timing is interesting, especially given the reports that US automakers are grumbling over the Japanese "hoarding" hybrid parts (read: efficient batteries).  I wonder if Ford, GM, et al., have read the handwriting on the wall in their sales figures and have decided the SUV is finally dead.  Problem is, US auto plants are all tuned-up to produce SUVs, not hybrids, or even more economical conventional models.  The motor city will really be hurting, whereas I think Toyota and Honda stand to make record profits here.
This still comes back though to the question of what happens to the SUV that is sold as used on the market.  Yes the price is depressed, but it is still out there, and people would still be driving the damned things.

It is only when their value to the scrapyard exceeds what anyone might pay for it that we would see a marked improvement.

One other observation though.  Getting a Prius is tough - they just don't make enough of the things, they are expensive, and they haven't been around long enough for people of more limited means to be able to afford a used one.

Diesels are tough to get too - realistically VW is the only one worth having unless you want a big diesel pickup or SUV, but at least these have been out there for a longer period and getting used ones isn't as tough as it would be for a used hybrid.

There are however quite a number of cars out there that get > 30mpg.  By my standards, not great, but if you are moving up from an SUV it would be a pretty good deal.

I have a friend who is really into Vespa scooters, and he just bought a Honda motorcycle so that he has something more suitable for highways.  He was telling me the other day that it appeared to him that there might be more people on scooters out there.

I hear anecdotal stories about people simply moving closer to work.   You wouldn't really be able to tell by looking at the roads.  There is a guy at work who drives a Fornicator, but he only lives 5 miles from the office.  He could practically walk to work if he wanted to.

Adding to the anecdotal stories: I have taken to consistently driving under the speed limit (I am now normally going 50-55 mph on the freeway) and it is my observation that I still feel safer (i.e., not as many people are flying past me) than I would have two years ago driving at the speed limit. I think that people are slowing down, at least a little, and I think this may have something to do with the price of gas.
Not to be cold water, but there are some external factors here on Truck/SUV sales. The domestics have been running "employee pricing" programs for some time and so hav cleared their inventory out and "pulled sales forward" (folks who would have bought one in September bought one in July because it was "such a good deal"). Anecdotally GM dealers seem pretty cleaned out especially of full size trucks/SUVs, Ford and Dodge less so (caveat emptor: I work for a contractor to GM). GM is in starting a model change for their full size SUVs so their dealers are going to keep less inventory of the current models (since the 07s have been publicly announced some demand will be pushed back).
I've been commuting by bicycle more and more each year, so by spring I was cycling 3-4 times a week once temperatures got reliably above freezing.  Since Katrina I've been thinking of society as having a fuel emergency and have cut back on the driving much further, helped by two weeks of beautiful weather in southeastern Wisconsin.  My first thought after Rita was that this late in the year the short days and colder temperatures will tend to push the less dedicated cycle commuters back into their cars, but, really, probably there aren't very many bike commuters anyway.  For me, winter is the driving season, since snow and ice are kind of a drag.  I still have a hard time understanding that overall summer is the driving season.  I have a very clear seasonal cycle in my expendatures on gasoline, and late spring, summer, and early fall are the low part of the cycle.

I had several people talk to me about my cycling shortly after Katrina, when gasoline here was over $3/gallon, but I really don't see any particular evidence of any more cycling or any less motoring.  At the peak of prices I heard people complaining, but not anymore.  The idea that there is a real problem and we should each try to do our part to help is totally absent.