Friday, December 12, 2008

DOT: Gasoline Demand Increases in October

by Bill McBride on 12/12/2008 01:24:00 PM

The Dept of Transportation reports on U.S. Traffic Volume Trends:

Travel on all roads and streets changed by -3.5% (-9.0 billion vehicle miles) for October 2008 as compared with October 2007. Travel for the month is estimated to be 249.7 billion vehicle miles.
Vehicle Miles Driven Click on graph for larger image in new window.

This graph shows the annual change in the rolling 12 month average of U.S. vehicles miles driven through October (from DOT). The number of U.S. vehicle miles driven has fallen off a cliff with high gasoline prices, rising unemployment and an overall weaker economy. Note: the rolling 12 month average is used to remove noise and seasonality.

By this measure, vehicle miles driven are off 3.4% YoY, and the decline in miles driven is worse than during the early '70s oil crisis - and about the same as the 1979-1980 declines. Miles driven in October 2008 were 3.5% less than October 2007, however miles driven were up sharply from September. (Note: the usual pattern is for miles driven to increase from September to October by about 2.5%, however this October miles were up over 7% due to lower gasoline prices)

Gasoline PricesThe second graph shows the weekly U.S. gasoline prices from the EIA through Dec 1st. This shows that gasoline prices really started to decline in October (still high in September). So we have been waiting for the October and November vehicle mile reports to see the impact of sharply lower gasoline prices.

As I noted in my thoughts on oil, I expected vehicle miles to start increasing again with lower prices. I believe the impact of price declines on driving behavior will more than offset higher unemployment and the weaker economy. This report suggests that view is correct.