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US Fuel Consumption

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

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  1. US Fuel Consumption October 6 2005 Myke Komarnitsky

  2. Source: http://www.fueleconomy.gov/feg/FEG2000.htm CAFE Standards Force fuel efficiency compliance… Unchanged under Bush Sr., Clinton, Bush Jr.

  3. SUV Market Share

  4. 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

  5. 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?

  6. 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

  7. 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.

  8. Conclusion • For a 10% increase in MPG • Miles increase by 9% • Total fuel use decreases by 6.36% • Real Life Savings

  9. 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

  10. 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.

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