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It's no secret (at least it shouldn't be) that gasoline sales have plunged. Here is a chart from my April 6 post Another Plunge in 3-Month Rolling Average of Petroleum and Gasoline Usage for Jan, Feb, March 2012
Jan-Feb-March 2012 petroleum and gasoline usage vs. the same three months in prior years.
Every month for quite some time, the rolling average of petroleum and gasoline usage has been trending down. The question is "Why?"
Some pin this on car mileage improvements but that answer is easy to discredit. Fuel efficiency has been rising for more than a decade, but the plunge did not start until the Great Recession in 2007.
However, the Great Recession is over, yet gasoline sales have not rebounded. Is this an indication another recession is on the horizon? That the recession never ended? Something else?
Transportation and the New Generation
Inquiring minds are reading a Frontier Group study Transportation and the New Generation: Why Young People Are Driving Less
From World War II until just a few years ago, the number of miles driven annually on America’s roads steadily increased. Then, at the turn of the century, something changed: Americans began driving less. By 2011, the average American was driving 6 percent fewer miles per year than in 2004.Long-Term Unemployment
The trend away from driving has been led by young people. From 2001 and 2009, the average annual number of vehicle-miles traveled by young people (16 to 34-year-olds) decreased from 10,300 miles to 7,900 miles per capita – a drop of 23 percent. The trend away from steady growth in driving is likely to be long-lasting – even once the economy recovers. Young people are driving less for a host of reasons – higher gas prices, new licensing laws, improvements in technology that support alternative transportation, and changes in Generation Y’s values and preferences – all factors that are likely to have an impact for years to come.
America’s young people are decreasing the amount they drive and increasing their use of transportation alternatives.
- According to the National Household Travel Survey, from 2001 to 2009, the annual number of vehicle-miles traveled by young people (16 to 34-year-olds) decreased from 10,300 miles to 7,900 miles per capita – a drop of 23 percent.
- In 2009, 16 to 34-year-olds as a whole took 24 percent more bike trips than they took in 2001, despite the age group actually shrinking in size by 2 percent.
- In 2009, 16 to 34-year-olds walked to destinations 16 percent more frequently than did 16 to 34-year-olds living in 2001.
- From 2001 to 2009, the number of passenger-miles traveled by 16 to 34-year-olds on public transit increased by 40 percent.
- According to Federal Highway Administration, from 2000 to 2010, the share of 14 to 34-year-olds without a driver’s license increased from 21 percent to 26 percent.
Young people’s transportation priorities and preferences differ from those of older generations.
- Many young people choose to replace driving with alternative transportation. According to a recent survey by KRC Research and Zipcar, 45 percent of young people (18-34 years old) polled said they have consciously made an effort to replace driving with transportation alternatives – this is compared with approximately 32 percent of all older populations.
- Many of America’s youth prefer to live places where they can easily walk, bike, and take public transportation. According to a recent study by the National Association for Realtors, young people are the generation most likely to prefer to live in an area characterized by nearby shopping, restaurants, schools, and public transportation as opposed to sprawl.
- Some young people purposely reduce their driving in an effort to curb their environmental impact. In the KRC Zipcar survey, 16 percent of 18 to 34-year-olds polled said they strongly agreed with the statement, “I want to protect the environment, so I drive less.” This is compared to approximately 9 percent of older generations.
The trend toward reduced driving has occurred even among young people who are employed and/or are doing well financially.
- The average young person (age 16-34) with a job drove 10,700 miles in 2009, compared with 12,800 miles in 2001.
- From 2001 to 2009, young people (16-34 years old) who lived in households with annual incomes of over $70,000 increased their use of public transit by 100 percent, biking by 122 percent, and walking by 37 percent.
Generation Y is not the only reason behind the plunge. Please consider Mean Duration Long-Term-Unemployment.
From 1980-2010 the average length of unemployment is between 15 and 20 weeks. Now it is 40. The unemployed are not driving to jobs they do not have.
Labor Force vs. Those Not in Labor Force
Labor Force Analysis
- Between 1980 and 1990 those not in the labor force was relatively constant while the labor force grew at a steady rate.
- Between 1990 and 2007 the labor force grew faster than those not in the labor force.
- Since 2008 those not in the labor force is in a strong uptrend while the labor force has been flat.
Nearly 9 million have dropped out of the labor force since November 2007 while the labor force itself is flat. It is safe to assume that group of dropouts is driving far fewer miles on average than they were before.
The mass retirement of boomers, much of it forced retirement is also in play. By forced retirement I mean those who exhausted unemployment benefits and retired to collect social security benefits even though they really want a job.
Timing is such that we can safely rule out cash-for-clunkers as a significant reason behind the plunge. Likewise, improvements in fuel mileage have continuous over decades and cannot account for a sudden plunge.
Reasons for Plunge in Gasoline Sales in Order of Importance
- Huge rise in those "not in labor force"
- Boomer demographics and retirement (much of it forced)
- Chronic long-term unemployment
- Changing social trends in younger generations, no doubt accelerated by the recession and student debt
- Declining real wages leave consumers with less discretionary spending cash (think shorter vacations closer to home)
- High price of gasoline
- Increase in online shopping means fewer trips
- Improved fuel rates and cash-for-clunkers
What About Car Sales?
Points two and three are a subset of those "not in labor force". Looking ahead, points 1 through 4 (especially points 2 and 4) will help put a cap on car sales.
Thus, those looking for auto sales' reversion-to-the-mean plus an overshoot, may have seen the overshoot already.
Reader Stephen points out a couple of additional items.
Hello MishReader Douglas writes ...
You might also want to factor in online entertainment and employment trends.
It's hard to quantify, but how many trips, and especially among the young, are eliminated by Netflix and other online sources and all of the multi-player online games?
Years ago, when kids were bored, they might have gone for a drive (downtown, movies, county, gravel pit, etc.) but now they stay at home and entertain themselves remotely. This is partially due to the cost of gas, but also partly due to social changes in entertainment.
Telecommuting must have an effect that isn't negligible, and worth mentioning as well.
Note, while I'm not young and don't play any online games, I average less than one trip to a movie theater a year and telecommute via the Internet for my work.
For my generation, those initial tastes of freedom that came with a drivers license are so firmly associated with cars that driving has become a learned behavior that we associate with those good times in high school. But for our kids, cars are inanimate objects devoid of emotional appeal. For these kids, many of whom delay getting their license, cars will never have the same emotional appeal we experienced. So I expect the trend to continue independent of gas prices.Reader Patrick writes ...
All the best- keep up the great blogging!
Hello MishI grew up in Danville, Illinois. Every Friday and Saturday evening high-schoolers would indeed endlessly "shoot the route" which was a loop up and down main street, turning around in downtown area on one end, and the parking lot of "Marty-K" on the other. "Marty-K" was a local hamburger joint similar to McDonalds. Hamburgers were 12 cents and 33 cents at Steak and Shake.
You can ride through just about any community I can think of within 100 miles of my home in North MS and you won't find 100 cars driving in 1 or 2 mile loops for 5 and 6 hours on a weekend night.
I've ridden through these areas during these "prime hours" and no one is "hanging out". They are sitting in front of a 60 inch plasma playing an Xbox.
Also, with Facebook and instant messaging smart phones, people are socially active 24/7. They don't have to congregate in groups on a weekend to "catch up" on their gossip, news and drama.
Not only the Xbox and Social trends have contributed but the Internet as a whole has helped to fill idle hands time. You can download TV Shows, Movies, etc... for a fraction of what it costs to drive to a theatre. Technology with home theatre today would rival theatres of the past. You don't have to fight the crowds and teenagers that spend $8 to see a movie, only spend it partying in the back corner until the ushers are called into remove them.
In junior college we no longer did the "shoot the route" thing. Instead, we drove 35 miles to Champaign and the campus of the University of Illinois every Friday and Saturday night without exception. Drinking age was 21 but all of the bars in Champaign-Urbana would let you in if you had a college student ID. The ID at Danville Junior College was good enough to get into the bars.
Things have certainly changed.
Mike "Mish" Shedlock
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