For seven decades, the United States consumed the lion’s share of the world’s oil. Excluding recessions and depressions, when drivers reduced the amount of miles driven, U.S. demand for oil has consistently shown growth year on year, peaking with the consumption of 371.5 million gallons of gasoline in 2006. Today, in 2010, that usage has dropped by 8 percent, down to 344 million gallons of gas refined from 8.2 million barrels of oil. The reasons behind the decline are varied, but both U.S. government and oil industry executives believe that demand has peaked for good.
First, there’s the issue of the economy, the 800 pound gorilla in the room that no one wants to confront directly. Many American households have been reduced to a single income, or double incomes at a fraction of pre-crash earnings. Jobs that existed in 2006 will take years, possibly decades, to return. Some jobs and some entire industries won’t ever see that level of employment again, as bleak as that may sound. Less disposable income means reducing the number of cars owned and the number of miles driven.
Beginning in 2012, automakers will need to increase fuel economy from 27.5 mpg across cars and light trucks to 30.1 mpg. By 2016, that CAFE standard rises to 35.5 mpg, which has automakers scrambling to design and build more fuel efficient cars and trucks. Like them or not, hybrids are likely to represent a significant portion of the new vehicle catalog in the next five years.
For better or for worse, blended fuels (gasoline mixed with ethanol or other biofuels) will become more prevalent. This isn’t a concern for new cars, which are being built to accommodate ethanol enhanced fuels; cars built before 2006, on the other hand, are likely to encounter problems running high ethanol content fuels. By 2022, the amount of biofuel added to gasoline will increase more than 2.5 times the amount added in 2011. Car collectors beware.
There are other factors at work as well. People are commuting shorter distances to work, and cheap airfares have made cross-country road trips a thing of the past. Some experts believe that our oil usage will fall to 1969 levels (5.4 million barrels a day) by 2030, while others don’t believe it will drop below 6.6 million barrels per day.
If the U.S. economy suddenly rebounds, and if demand in other parts of the world decreases (reducing oil prices), the decline could reverse. No one expects that to happen any time soon, so expect gas prices to stay where they are for the foreseeable future.