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US Fuel Consumption October 6 2005 Myke Komarnitsky Source: http://www.fueleconomy.gov/feg/FEG2000.htm CAFE Standards Force fuel efficiency compliance… Unchanged under Bush Sr., Clinton, Bush Jr. SUV Market Share

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us fuel consumption

US Fuel Consumption

October 6 2005

Myke Komarnitsky

cafe standards

Source: http://www.fueleconomy.gov/feg/FEG2000.htm

CAFE Standards

Force fuel efficiency compliance…

Unchanged under Bush Sr.,

Clinton, Bush Jr.

slide4
Once in compliance, efficiency does not go any higher. Meanwhile, power goes up a lot…

HP/100 pounds

Time of big

increase in actual

fleet MPG

1985-200343% increase

impact on us fuel consumption from rising cafe fuel regulations
Impact on US fuel consumption from rising CAFE fuel regulations
  • New cars consume less fuel/mile thus
  • People pay less $/mile (holding gas prices constant)HOWEVER…
  • Miles driven increases when $/mile decreases
    • Key question: By How Much?
price elasticity of demand
Price Elasticity of Demand
  • Ed = DQ/DP; DQ = Ed*DP

(Q2-Q1)/Q1=Ed* (P2-P1)/P1

Q2 = Q1 * (Ed * (P2-P1)/P1) + Q1

  • Example with Gas

Source: Mackinac Center for Public Policy

price elasticity of demand7
Price Elasticity of Demand

Sources

  • Consumer demand in the United States, 1929-1970: analyses and projectionsHS Houthakker, LD Taylor - 1966 - Cambridge: Harvard University Press
  • Economics: Private and Public Choice, James D. Gwartney and Richard L. Stroup, 8th edition 1997.
conclusion
Conclusion
  • For a 10% increase in MPG
    • Miles increase by 9%
    • Total fuel use decreases by 6.36%
  • Real Life Savings
so what
So What?
  • US Gas Consumption: 20.4M bbl/day
    • Automobiles: 9.0M bbl/day (44%)
  • ANWR
    • 1.00-1.35M bbl/day, attained 2030-2040
  • 20% increase in CAFE standards
    • 500K bbl/day, attained 2025

Investment Costs to Attain

    • ANWR: Significant capital, operational costs
    • CAFE increase: technology already in use (limited production), but primary “cost” is customer enjoyment from HP sacrifices

Source: http://www.eia.doe.gov/emeu/cabs/usa.html

final thoughts
Final Thoughts
  • America’s rising demand is outstripping supply
    • Unresolved consequence – extremely high fuel prices degrades economic performance
  • Solution
    • Drill ANWR
    • Immediately increase CAFE fuel standards, but by a moderate amount to minimize capital investment shocks for automobile manufacturers

To just drill ANWR is irresponsible.