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Fuel prices and efficiency - Sept 20

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

Chris Nelder, Smart Planet
Improving vehicle efficiency is often cited as a major reason for declining U.S. oil consumption since 2005. But is there any evidence for that claim?

Falling domestic oil consumption is a key factor in the new narrative about the U.S. achieving “energy independence” in the next eight years through a combination of improved vehicle efficiency and increased domestic drilling. An April research note by financial services company Raymond James depicted its forecast in this chart:

The much-ballyhooed May, 2012 forecast by Edward Morse of Citigroup also cited efficiency as a key pathway to energy independence by 2020, asserting, “US liquid fuels demand is in structural, secular decline due to demographics, fuel efficiency, transport technology shifts.”

Last December, Daniel Yergin, chairman of the oil consultancy IHS CERA, explained the decline in US oil consumption thusly in an editorial for the Wall Street Journal: “What’s happening? Part of the answer is demand. U.S. oil consumption reached what might be called ‘peak demand’ in 2005 and has since declined. The country has become more efficient in its use of petroleum, and that will continue as vehicle fuel economy goes up. The economic slump has also muffled demand.”...
(19 September 2012)

Thresholds in the economic effects of oil prices

James Hamilton, Econbrowser
As U.S. retail gasoline prices once again near $4.00 a gallon, does this pose a threat to the economy and President Obama's prospects for re-election? My answer is no.

The graph below plots average U.S. gasoline prices, adjusted for inflation, over the last decade. This is now the fourth time we've been near the $4 threshold. It first happened in June 2008, again in May 2011, and again in April of this year. In fact, on each of those previous 3 occasions the average U.S. retail price of gasoline was higher than it is today...
(19 September 2012)

Fuel use in new cars could halve by 2030: IEA

Muriel Boselli, Reuters
Fuel consumption in new vehicles could be slashed by half in the next 20 years, helping the world curb its dependency on oil, provided governments set up bold policies to boost the use of available technologies, the International Energy Agency said on Wednesday.

The transport sector, which consumes around one fifth of global primary energy, will account for nearly all the future growth in oil use, said the Paris-based agency, which advises industrial nations on energy policy.

The necessary technologies are already cost-effective, the IEA said, in that fuel savings outweigh the additional costs over vehicle life, but those are not deployed widely enough.

"Strong policies are needed to ensure that the full potential of these technologies is achieved over the next 10 to 20 years," the IEA said in one of two reports on the fuel economy of road vehicles...
(19 September 2012)

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