Friday, January 9, 2009

VMT vs Real Gasoline and Diesel Prices 1980-Oct 2008

I was so entranced--and I suppose I am that geeky--by Rebecca Wilder's vehicle miles traveled vs gasoline price graph proving that people in the US drive less when gasoline costs more that I drew up two new graphs of the change in vehicle miles traveled vs gasoline and diesel prices in real 2008 dollars from 1980 to October 2008.

These do make one expect, however, that no matter what people are telling Gallop, the low price environment should increase the number of vehicle miles driven. I suppose the limiting factor is the "once in a 100 years" financial event, which is hard to "price in" via data from 1980 on. Still, I'd imagine miles driven will go up, just not as much as a similar prices in the past would suggest.

You'll note that $2.50/gallon (for both diesel and gasoline) appears to be the breaking point.

Ms. Wilder is the muse of Microsoft Excel! =D

UPDATE: I graphed in 2008 dollar cost averages of crude imports against vehicle miles driven. It looks like the breaking point in terms of average imported crude costs (which account for about 50% of crude consumed in 1980 and 60% today) is a little over $70/b.

I tried plugging in average monthly price of front month sweet light crude on NYMEX in 2008 dollars to see if I could get a breaking point for the pricing mechanism itself, but the EIA data only goes back to 1983. Anyways, for your viewing pleasure:

I guess you might conclude that the breaking point might be somewhere around $70-75/b.


Rebecca Wilder said...

Great chart! Gas prices will probably rise again when the world comes out of this recession. Thanks again for the link!

The real prices do hammer out the point. Are you using headline CPI or CPI ex energy to deflate the prices? Where did you get the data back to 80? The EIA data is truncated at 1990.


freude bud said...

The EIA hosts real and nominal price series for gasoline, diesel, heating oil, and the average cost of imported crude oil--that last one is tricky to say the least.

You can find the link to the series on this page:

Gas prices are actually rising a bit just now. For a while they were trading at below the cost of crude (but there was a very nice crack spread for diesel/heating oil). I don't think they'll be heading back to $2.50/g in the near future, though.

Loved yr chart! -- FB

freude bud said...

Oh, the EIA calculates real prices using the BLS's headline CPI, IIUC. They calculate real price for Month A by taking "Nominal Price in Month A · (Consumer Price Index in Base Month / Consumer Price Index in Month A)". The base month is the month of publication.

- FB