Higher MPGs, More Miles Driven … hmmm

Ken’s Take: A couple analyses I did last summer suggested that people drive more when they get higher MPG from their vehicles … largely (or completely) offsetting the efficiency gain.

image

http://online.wsj.com/article/SB124338431100556717.html?mod=djemalert

Here are a couple of articles citing studies going back to the 19th century that draw the same conclusion.

* * * * *

Excerpted from Heritage Foundation, “Why the Government’s CAFE Standards for Fuel Efficiency Should Be Repealed, not Increased”, July 11, 2001

Clearly, the CAFE program has failed to accomplish its purposes. Consumption has not decreased.

As fuel efficiency improves, consumers have generally increased their driving, offsetting nearly all the gains in fuel efficiency.

Advocates of higher CAFE standards argue that increasing miles per gallon will reduce gas consumption. What they fail to mention is the well-known “rebound effect”–greater energy efficiency leads to greater energy consumption.

As more fuel-efficient vehicle costs less to drive per mile, so vehicle mileage increases.

Since 1970, the United States has made cars almost 50% more efficient; in that period of time, the average number of miles a person drives has doubled.
http://www.heritage.org/Research/EnergyandEnvironment/BG1458.cfm

* * * * *

Interesting Historical Perspective

Excerpted from WSJ: “The rebound effect: Conservation Wastes Energy,”  May 17, 2001

Way back in the 19th century, English economist Stanley Jevons embarked on a study of coal and its consumption. He was intrigued by the introduction of James Watt’s new, efficient steam engine, which began replacing older, more energy-hungry engines.

Jevons found that in Scotland (Watt’s native land), coal consumption was initially reduced by one-third. But in the ensuing years of 1830 to 1863, there was a tenfold increase in consumption. Why? The engines were so much cheaper to run that people used them far more than they ever would have before. Greater efficiency had produced more energy use, not less.

The same arguments apply to government-mandated energy efficiencies today.

Since 1970, the U.S. has made cars almost 50% more efficient; in that period of time, the average number of miles a person drives has doubled. Studies show that when consumers buy more energy-efficient air conditioners, they run them longer because it still costs the same amount.

Consumers, in short, spend to the size of their billfolds.

And that is the failing of government-led demand reduction.

There is only one thing that convinces Americans that they should conserve — market prices. Only when gas prices start to pinch will Americans drive less or hunt for smaller cars.
http://www.opinionjournal.com/columnists/kstrassel/?id=95000484

* * * * *
Want more from the Homa Files?
     Click link =>
  The Homa Files Blog

3 Responses to “Higher MPGs, More Miles Driven … hmmm”

  1. Consultant Ninja Says:

    Ken-

    Your stated facts contradict the headline.

    1) Carl Balik’s article supports the argument that the “rebound effect” of higher efficiency leading to more miles is small.

    2) The 8-year-old WSJ editorial cites only the Watt steam engine, which was more efficient than other engines by a factor of 4. The jump in demand was discontinuous, in that it stimulated many new uses of engines in places previously unconsidered.

    3) The heritage foundation “analysis” on the effect on consumption only sources the WSJ article in (2), and the CATO institute. Some sort of strange echo chamber effect is happening here.

    —-

    As a marketer, you should know that this debate centers around what the price elasticity of demand is for gasoline. My opinion and research is that it is partially inelastic.

    I also think your position puts you in the weird spot of supporting less efficiency for our vehicle fleet. Why increase gas prices when we could have a CAFE maximum – that is, the fleet must get no MORE than, say, 10 miles to the gallon? That would, by your position, stimulate lower demand for gasoline.

  2. Cilantro13 Says:

    Like your blog and generally agree, but not sure I buy the conclusion here.

    First, I am a scientist turned lawyer (to give some credence to what I am about to say about the data presented).

    The data shows two graphs that essentially mirror each other. The premise your proposed is that as MPG increases, miles driven increase. The problem is that there are no controls to rule out obvious confounding factors, bringing your conclusion into doubt.

    For example, what is the average price of gasoline as a function of income and adjusted for inflation during the same time period? I would argue that people will drive more if gas is affordable relative to their income — the more affordable it is, the more likely they are to take a couple of weekend road trips. The result, more miles, but not because MPG increased.

    It is hard to buy the correlation without controls eliminating bias from other variables, some of which that might have more influence on the result than MPG. What about the distance people are from their jobs — does the exodus into the suburbs have any correlation to miles driven? Not saying either of these factors change the conclusion, just that without controlling for factors like this, your conclusion is suspect.

    The heritage foundation research is equally suspect. Obviously they want to argue against CAFE standards, but the reality is that MPG would have increased as gas prices increased because of market pressure with or without CAFE standards (which is the point they should be making about why such standards are irrelevant at the end of the day if all that is desired is a result). Not saying emission standards didn’t contribute to the increase in MPG, but the heritage foundation is also making a logical leap that is highly speculative without hard data controlling for obvious variables. Nonetheless, it could be true (the rebound effect), but I question that it is true as a backlash to CAFE standards. The more likely explanation is that as driving gets cheaper thanks to increased MPG, people drive more?

    These graphs are getting dangerously close to Al Gore’s global warming “graphs” — he started with a conclusion and found data to support it. In science world, this is called data mining as is just as big a no-no as plagiarism is to the English major.

  3. Mike Says:

    Watch this video with the Chairman of Ford. He support the CAFE standards. Detroit wants these standards.

    http://money.cnn.com/video/fortune/2009/07/01/f_bg_ford_govt_energy.fortune/

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s