One of the ongoing debates on this blog is the extent to which American drivers are willing and able to modify their driving habits in response to higher gasoline prices. Well, here’s the latest data. Reuters reports:
HOUSTON (Reuters) — High gasoline prices not only slowed fuel demand growth and cut sales of gas-guzzling vehicles in 2005, they also prompted Americans to drive less for the first time in 25 years, a consulting group said in a report Thursday.
The drop in driving was small – the average American drove 13,657 miles (21,978.8 km) per year in 2005, down from 13,711 miles in 2004 – but it is more evidence that the market works and prices help control consumption, Boston-based Cambridge Energy Research Associates said.
“Price matters,” CERA Chairman Daniel Yergin said.
Notable was the fact that driving declined even though the general economy remained strong. The decline was not induced by recession and a contraction of economic activity.
Miles driven per motorist was down partly because there are more elderly people driving, and they tend to drive less, the report said. Between 1980 and 2004, drivers under age 21 dropped from 18.8 million to 15.8 million and those over 65 almost doubled, from 15.4 million to nearly 29 million, CERA said.
I find the impact of changing demographics to be particularly interesting. I’ve argued in the past that the the aging of the population (old people don’t commute to work) and the leveling off of women in the workforce will slow the rate of increase in Vehicle Miles Driven compared to historical rates over the past 20 to 30 years. That’s why I placed little faith in long-range forecasts that Virginia faces a $108 billion shortfall in transportation revenues over the next 20 years.
Demographics may explain a slowing in the rate of increase but it doesn’t explain the outright decline in Vehicle Miles Driven. The big story is that people do respond to price incentives. Higher gasoline prices do reduce driving. The lesson to learn: Time-of-day pricing for tolls will reduce congestion. Likewise, time-of-day pricing for parking, as I will argue next Monday, will reduce driving.
The moral: Any transportation policy that attempts to match every increase in Vehicle Miles Driven with an increase in road capacity is doomed to failure. As with every other sector of a functioning capitalist economy, we need to incorporate pricing into the transportation marketplace that sends appropriate signals to consumers (motorists) and vendors (those who supply transportation services).
(Hat tip to Ed Risse for pointing me to the article.)