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Has vehicle efficiency really curbed U.S. oil demand?

Two other areas that would contribute to reduced oil usage is increased efficiency by refineries over the last 10+ years to extract more gas from every barrel of oil. I remember this because it was causing a reduction in asphalt which caused the price of asphalt to skyrocket in the 2006/2007 time frame (asphalt is the leftover/final product after everything else is extracted from the oil). As I recall they were able to get an extra gallon or two out of every barrel of oil.

I also recall several stories about chemical companies moving out of the US. I'm wondering how much of this manufacturing has left the US and how that would affect US demand for oil. This would be on top of reduced demand due to the recession.
Eric

There are many other reasons for why our oil demand has fallen, including curbed manufacturing activity due to the recession. But as I said, my purpose in this article wasn't to detail them all - it was only to investigate the vehicle efficiency claim.

Refineries are able to nudge their processes to produce slightly more gasoline and diesel out of a barrel, but at the expense of lower production of heavier distillates. So-called refinery gains are also responsible for a little growth in the quantity of refined products produced out of a barrel. I discussed that in a previous column: http://www.smartplanet.com/blog/energy-futurist/fuel-to-byrne/480 But these factors would increase supply, not reduce demand.

This handy chart explains US manufacuring nicely. Has it declined since 2005? No. It's slightly higher. So "decline in manufacturing contributes to decline in US oil production since 2005" = epic fail.

http://www.scdigest.com/assets/newsviews/12-07-19-1.php?CID=6028

"""my purpose in this article wasn't to detail them all - it was only to investigate the vehicle efficiency claim. """

Yes that would have been a reasonable investigative scope, yet the article did not stop there:

"""In short: Its not fuel efficiency. Its the recession, stupid."""

That not A, therefore B conclusion is unsupported by the auto efficiency investigation in the article, as the author's own response above on premise indicates.

BTW, when unsupported conclusions pop up, they often indicate the body of the argument was guided by the desired conclusion, instead of following the inevitably conflicting at times data where it leads.

exactly - perhaps vehicle efficiency isn't all that important, but blaming the "recession" for a decline from 2005 to 2011 is stupid, because the economy was bigger in 2011 than in 2005

Real unemployment levels of 12-20%, lower wages, and gas prices that have doubled - are responsible for the drop in demand. Not fuel economy standards.

The world populace prefers mobility and modern living, which require energy inputs, and while conservation yields gains in the short run, with 2.5 billion people wanting for indoor plumbing, fresh water, heating and air conditioning, can't we focus on developing new, cheap and plentiful energy and fuel forms for all, rather than endlessly bashing people for trying to live their lives using the (fossil fuel) resources we have available today?

Mr. Neider's argument is that if it's not fuel economy, then it MUST be the recession. That's poor science, because he hasn't ruled out other factors.

For example, Mr. Neider overlooks the record price of gasoline on driving behavior. The peak gas price was reached in July, 2008, just before the global panic hit. While there was a big dip just afterwards, it's been high by historical standards since. The price is a factor of global supply and demand, and the recession has amounted only to a minor dip of the demand curve.

You see this in the first graph. Yes, there was a demand dip starting with the recession in late 2007. But the recession ended in June, 2009 and the economy has been growing ever since. Demand did rise slightly in 2009, but it's still been below 2005 levels until now. How does Mr. Neider explain that with his recession hypothesis?

As a final note, if you turn Mr. Neider's argument around, he's saying there's not much to be gained by the Obama administration's new fuel economy standards. So why should we do them, especially when they will add thousands of dollars to the price of a new car?

No, zackers, as usual, you go well out of your way to miss the point. "Poor science" is making your argument without supplying any data, and missing important details, like the spelling of my name. You consistently manage to do both.

Indeed, you reinforced my argument: high prices helped to kill demand, which is a fundamental aspect of the recession. It's completely backwards to assert that "if the global economy ever gets out of its funk...demand [will] go down even further." Growing economies consume more oil, not less.

Nor did my argument make any claim whatsoever about the efficacy of fuel economy standards going forward - my analysis was strictly about the efficiency of new vehicles in the recent past.

If you want to argue that our oil demand has declined for reasons other than the recession, or that vehicle efficiency has contributed more to that decline than I calculate, then you should do what I did: Dig up the data, and show your numbers and their sources. Anything less is just blabbering.

That's rich. The economy has been growing much, much faster than oil demand over the past 3 years. Per capita oil consumption is way off from 2005, and per capita GDP is a bit higher. These are basic facts, do I need to research them for you?

When per-capita oil consumption falls off a cliff while per-capita GDP plateaus, your "it's the 7 years of recession" argument sort of falls flat on it's face.

is an entirely different subject from vehicle efficiency, as is per-capita oil consumption...and again, you have presented zero data to rebut an argument entirely consisting of data. But then, that's your game...

(I think readers will benefit more from learning how to refute Nelder-isms on their own)

Per capita GDP is the counter-argument to the recession argument. A recession is a decrease in aggregate GDP - we're not even seeing a decrease in per-capita GDP. Long way from seeing a recession over the entire 2005-2012 time span.

You bring up the recession explantion - I explain why there is no recession. There was a recession (a biggie) in the middle of your time frame, but the economy has more than recovered from that recession, in an aggregate sense.

Perhaps the rise in unemployment explains things a bit. But I don't think the total number of employed people has dropped much (or at all) from it's 2005 number. It's more like the population has grown and jobs have failed to keep up. So it's hard to explain declining oil production from fewer workers.

" But then, that's your game..." your game is that of some of my math students. Present an obiously wrong answer via an elaborate and non-standard technique, then say "if you think I'm wrong, show me where" .... it cracks me up that you think this is the way to become an "energy expert". Cracks me up a lot.

Mr. Nelder is obviously using the term "recession" in the colloquial rather than formal sense. The key statistics are therefore unemployment & disposable income per employed individual rather than GDP. Mr. Nelder lists his assumptions which are entirely reasonable to support his conclusion in a piece of this length. A lengthy paper would substitute variables for some of the givens.

Our recent history is that high fuel prices & the onset of the recession occurred closely together. The combination of current fuel prices & a fast growing economy hasn't existed long enough on a national level to provide a history of fuel consumption. There might be on a regional or state level, if anyone compiles data that way.

There's no argument that manufacturers built & the American public bought bigger, more powerful & less fuel efficient vehicles when fuel prices were low & the economy was better. There's also no argument that more US production will not offset increased global demand from other countries such as China & India.

Words have meanings, including the word recession, which refers to economic growth.

That said, I'm not sure why "disposable income per employed individual" is inconsistent with more fuel efficient cars.

Nelder specifically cites a decline in manufacturing as one of the reasons for a decline in oil consumption (in the comments),. Nevertheless, over the time span he mentions, there has been no decline in manufacturing. What more proof do you need that Nelder is basically a fabulist who will say anything to support his pre-determined thesis.

Here is the US manufacturing. Since 2005, it went up, then down, then back up again. This is not a "cancer patient" wasting away, re:less of what Nelder pretends.

http://www.scdigest.com/assets/newsviews/12-07-19-1.php?CID=6028

Turning the analysis on its head and starting from the-recession-did-it hypothesis is much simpler.

What else is relevant to the recession's impact on ground transportation aside from ...transporting things, i.e. Vehicle Miles Traveled? VMT declined about 3% since 2007, while US all-oil consumption fell ~15% (21.8 mbpd to 18.1 mbpd). So place 20% of the consumption decline on recession but the rest lies elsewhere.

Nice piece of work on the possibilities from fuel economy increase, but I don't see it as exhaustive. There may well be other fuel economy impacts, and then there are any number of other areas where oil may be on the decrease:
1. New England heating oil. New England has been one of the last hold outs for oil heat. There's a news report out there claiming the Maine oil heaters cut consumption 45% over the last several years by insulating and switching to other heat sources like heat pumps and high efficiency wood stoves.
http://bangordailynews.com/2011/11/13/business/maine-heating-oil-use-dropped-45-percent-between-2004-and-2009/
2. Plastics chemical feedstocks. Has been primarily oil; is now rapidly switching to natural gas sourced ethane. E.g.
http://www.dow.com/texas/freeport/news/2012/20120419a.htm
http://www.marketwatch.com/story/dow-to-build-new-ethylene-production-plant-at-dow-texas-operations-2012-04-19
3. Driving behavior. Perhaps as simple as a higher price encouraging people to keep the foot off it, or fleets and investing in fewer-stops software and the like.
4. Natural gas vehicle use up a third by consumption of gas, i.e. that's VMT coming from gas not oil.
http://si.wsj.net/public/resources/images/IV-AA198F_Trans_G_20120614160604.jpg

Nelder is looking at the decline since 2005, not 2007. This is why his "the recession did it" hypothesis is so half-baked.

If he was measuring from 2007 to 2011, I'd be inclined to give him a bit more credit. But, relative to 2005, the economy is certainly bigger, and thus "the recession did it" makes no sense at all.

5 minutes with Google will confirm that per-capita, inflation adjusted GDP is about the same now as it was in 2005. Per-capita oil-consumption, on the other hand, is way, way off.

How Chris "the big miss" goes from this to the argument of "the recession is killing oil consumption" is a mystery.

You can't use this "if I'm wrong show me where" defense with this stuff. If you're confronted with 2+2 and your result is negative 3 and a half, then everyone with a brain knows your wrong.

There is a reason why Nelder's opinions are way, way, out on the lunatic fringe - it's not because he's smarter than everyone else. Yergin has more mindshare than Nelder for a reason.

The reason for the oil decrease is probably common sense stuff that Nelder has trouble understanding. Some people are driving less, some people are driving much more fuel efficient cars, the shipping industry has moved some traffic from trucks to trains and barges, people have switched from heating oil to other heating solutions, the airline industry packs in more passengers on each flight, etc.

The people who drive the most - they are the ones who are picking up Priuses and Diesels, etc.

James,

You must lay awake at night cogitating on how to increase your bilious, unpleasant profile. When the argument goes against you, change the question and troll on. Puff yourself up and try to blow down a house with miss-aimed, scattershot ridicule, a house built with hours, maybe days of effort.

All of us here don't refuse to listen and think, thank Heavens.

Moderator, Throw this out, if you'll do the same with the above. There's no excuse for this level of disrespect from either of us.

Ron is shocked, shocked, to find snarky comments on the internet.

This site runs on eyeballs, son, and bit of fireworks puts eyeballs on the screen.

Nelder's words

"Hey, since Johnny got cancer two years ago and lost his appetite, hes eating less than half of what he used to. If he keeps going like this, in another two years he might be eating another 25 percent less! Super!"

Yet Nelder give not one aggregate indicator that is lower now than 2005. Not one. Why? Because no such indicator exists. The economy is bigger now than in 2005, and it's oil consumption is smaller. Nelder's explanation for why oil consumption is smaller to so say that the economy is smaller. But the economy is not smaller than it was in 2005, it's bigger.

You can't make this stuff up. Nelder never ceases to amaze with his inability to recognize basic facts.

At least he doesn't toss up the offensive "Obama monkey" photo anymore.

Chris,

Quite a data slog this article and quite a boomerang from the last article. By the time I got to the end of this'un, I was ready to throw up my hands and say, "This just has too many variables to say anything definitive." That may be true, but the trying was magnificent.

The pic at the top say's so much: 45 years ago a prototype auto from a genius of many talents got better mpg while carrying 3 more folks than today's soccermobil and still managed to look like a future wet dream. Is that sad commentary or what on the wind down of the fossil fuel age and we fossil fools?

Why not this? http://www.youtube.com/watch?v=Iov_pNSySLM

I agree, Ron - In retrospect, a bottom-up approach to this question was probably the hardest way to go about the analysis, and the accuracy of the results is not great. For example, as one astute analyst wrote to me privately, it might not have been correct to apply the cracking adjustment as I did (or at all). Above all, I like to learn something from investigating the questions I explore in my work, and what I learned here was that this was probably too complex an analysis to undertake with the time I had to devote to it!

Still, for another way of looking at it, under the EIA's accounting for fuel by sector, total petroleum consumed by the power sector and the transportation sector fell by 1,151 mbpd from 2005-2011. Putting aside the question of why that doesn't match more closely to their 1.85 mbpd number for the oil demand decline over that period (perhaps because it's for finished products only), and just taking it at face value, their motor gasoline decline number was 383.7 thousand barrels per day, or 33% of the total decline. The rest of the decline was in jet fuel, diesel, the power sector, and so on. So whether the approach I took was valid or not, the result was in the right ballpark. By that measure, even if all the decline in motor fuel consumption owed to better efficiency (and it didn't), it could only account for one-third of the decline at most.

A final, simpler way of looking at it would be the remarkable resiliency in gasoline and diesel demand since 2005. From that perspective, efficiency hardly shows up at all, given that the VMT has declined.

BTW, the Dymaxion was 1933, so that was actually 79 years ago!

Anyway - on to other topics. I love the e-trike concept! Lots of potential there for sure. Thanks for the link.

"The rest of the decline was in jet fuel, diesel, the power sector"

Diesel and jet fuel are also used more efficiently. Total passenger miles isn't down - planes are just more full and more efficient. Total ton-miles of freight isn't down, it's just being used more efficiently. Total kwHR of electricity consumed isn't down, it's just produced more efficiently. Over and over, it's the opposite of what you're saying - relative to 2005, these aggregate indicators of economic activity are up, and yet total fuel consumption is down. And yet your explanation is the total fuel consumption is down, because total economic activity is down. When someone points out to you that total economic activity is up and not down, you get mad and say "find the mistake in my analysis".

And yet you wonder why Yergin gets all the talk shows and the book deals.

What you failed to note is that only about 70% of the total oil is used in transportation. Not sure how much is used for cars, but after we take out airline, train and trucks, heating oil consumption, and electric generation, it must be at or below 10 million gallons per day for gasoline.

This means that the percentage reduction of gasoline is at least double what you have stated from efficient cars .

30% of the oil is for plastics and other petroleum products. Of course those will go down in a recession.

I do not see the point of including the consumption of the chemical industry in the discussion of vehicle efficiency.

Another major change is that gasoline is now the largest export of the USA !

How is this being accounted for in your calculation?