Wednesday, May 18, 2005

Blaming the SUVs

SUVs and their owners get the blame for all sorts of ills, including higher traffic fatality rates and parking lot congestion. They are even lampooned in Dilbert. And with gas prices sky high, at least in nominal dollars, SUVs take the brunt of concerns about our growing dependence on imported oil. The data needed to assess the validity of this complaint are readily available. They demonstrate that SUVs have a sizeable impact on US oil consumption, and by extension, on fuel prices. While that result might not surprise anyone, the same data reveal another, even bigger culprit, posing a major challenge for efforts to reduce oil consumption.

The latest year for which all the necessary statistics are available is 2003. In that year, 87 million vehicles were classified as 'light trucks', including SUVs, pickup trucks, and all sorts of commercial vehicles. They drove 11,400 miles each, on average, and they averaged 21 miles per gallon, compared to 28 for passenger cars. The total number of light trucks in service in 1985, at the beginning of the SUV trend, seems like a reasonable proxy for all the non-SUV types of light truck today. If we assume that all the light trucks sold after 1985 were SUVs (or pickups used as SUVs,) that gives us a total of 50 million SUVs in 2003. With SUV sales running at half of all US car sales of 14.8 million per year, this seems like the right ballpark.

If the SUV fad had never happened, or if SUVs didn't fall under a special category of the Corporate Average Fuel Economy regulations allowing them to get considerably worse fuel economy than 'passenger cars', their owners would likely have bought cars getting about the same gas mileage as the average for the rest of the car fleet. Based on all these assumption, SUVs consume at least 440,000 barrels per day more fuel than if they were 'passenger cars'. That works out to 6.8 billion gallons per year, or about 5% of total gasoline demand.

What does that volume mean for prices? Well, this volume is about a quarter of the recent global demand increase that is generally held responsible for pushing oil prices from $30 to $50/barrel. In terms of gasoline, it's the difference between US refineries running at maximum capacity or at more comfortable levels. Or it's half of all the gasoline the US imports. No one can calculate the impact of this precisely, but when markets are as tight as they are now, that extra 5% of demand could easily account for 15-20 cents per gallon of today's prices.

Before we lay all the blame on SUV owners, though, it's worth considering another fact that emerges from the same data. Compared to 1985, Americans now drive 2,000 miles more per year, on average--passenger cars and SUVs alike. The impact of this change is more than twice as big as that of SUVs: 1 million barrels per day of extra fuel consumption at a fleet average of 25 miles per gallon. In other words, changes in our behavior have increased gasoline demand in the US by 1.5 million barrels per day, and 2/3 of that has nothing to do with the switch to SUVs.

Here's one last statistic to ponder: if the late 1980s had brought us a fad for cars getting 50 miles per gallon, instead of for SUVs getting 21, we would today use a million fewer barrels per day gasoline than we do. That would be just enough to make up for all of our increased driving. This illustrates the essence of today's fuel-economy debate: over time, the choices of millions of individual consumers--not just the kind of cars they buy, but how they use them--add up to big volumes of oil, with serious economic, environmental and security implications.

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