Why the Cost of Driving Is on the Decline

How gasoline prices, consumption and vehicle costs add up

CHICAGO -- Fuel is taking an increasingly smaller bite out of consumers’ pocketbooks, according to two recent reports.

2017 outlook

The average U.S. household expenditure on gasoline is projected to total $1,977 in 2017, according to the September 2017 Short-Term Energy Outlook (STEO) from the U.S. Energy Information Administration (EIA). This equates to about 2.4% of mean household income. This is about on track with 2015 and 2016, when gasoline expenditures averaged near or below $2,000, or 2.5% of household income.

Household gasoline expenditures most recently peaked in 2008, when they hit 4.0% of household income, or an average of $2,715 per household.

According to EIA, household gasoline expenditures have shifted over the last decade along with changes in gasoline prices and consumption. The higher the price of gasoline, the more of a household’s income goes to gasoline expenditures, which in turn dampens consumption. But as gas prices have trended downward since 2012, vehicle travel and gasoline consumption have grown.

In its September STEO, EIA projects gasoline consumption for 2017 to hit a record high of 9.3 million barrels per day. It estimates the average gasoline price for 2017 to be 33% lower than that for 2012, or $2.48 per gallon.

30-year analysis

Meanwhile, transportation expenditures overall are declining despite higher vehicle costs and relatively higher fuel prices, according to the University of Michigan’s Transportation Research Institute (UMTRI), Ann Arbor, Mich.

In an analysis, UMTRI found that within the past 30 years, the price of gasoline has more than doubled and the average cost of a new vehicle has risen to more than $30,000. In 1989, an average of 18.9% of household expenditures were dedicated to transportation, including vehicle, gasoline and related costs. By 2016, that share had fallen to 15.8%.

From 1989 to 2016, absolute transportation expenditures (adjusted for inflation) fell 11.3% to $4,675. Vehicle purchases fell from 8.4% of all expenditures in 1989 to 6.3% in 2016. And gasoline and motor oil’s share declined 0.2 points to 3.3% of expenditures.


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