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Economy in Brief

 U.S. Gasoline Prices Up - Driving Down
by Tom Moeller July 7, 2008

Perhaps 2.2% doesn't sound like much, but as a measure of the degree motor vehicle miles driven in the U.S.has fallen, it continues an unprecedented decline in demand. That follows an inexorable rise in vehicle miles driven. Just since 1993, total mileage driven (the distances traveled by an increasing number of vehicles) had risen by one-third.

And it wasn't just the latest spike in prices that affected drivers' behavior. The twelve-month average of vehicle miles driven peaked back in late-2006. Since that all-time peak, vehicle miles are down 1.5%.

Last month, gasoline prices moved above $4.00 per gallon (which was double their average price in 2005). In response, vehicle miles driven fell 2.2% from the first four months of 2007. As further emphasis of the degree to which vehicle miles fell, 2008's first four months' total miles driven was the lowest in three years. (The data for this past May will be available in roughly two weeks in Haver's USECON data base under "Other Stats.")

Comments made this past April from the U.S. Department of Energy regarding gasoline prices can be found here.

In addition to driving fewer miles, motorists responded by buying fewer of the less fuel efficient light trucks. Data released last week indicate that June sales of light trucks overall fell to their lowest level since 1995 (-24.3% y/y). The relatively fuel inefficient U.S. made trucks fared even worse. Domestic light truck sales of 4.98 mil. (AR) units were at their lowest level since 1993 (-24.6% y/y). Sales of imported light trucks also were hit and show a 22.8% y/y decline. But the decline was from record levels in 2007.

Clearly, the rise in crude oil prices is behind the surge in gasoline prices. Near $140 per barrel the cost of a barrel light sweet crude (WTI) was double that of a year ago.

Crude Awakening: Behind the Surge in Oil Prices from the Federal Reserve Bank of Dallas can be found here.

  April March April '07 2007 2006 2005
U.S. Vehicle Miles Traveled (million) 245,888 246,182 250,616 2,993,100 3,018,390 2,968,576
  Year-to-Year -1.8% -4.3% -4.2% -0.8% 1.7% 1.1%
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