Remember peak car? Over the past five years, various analysts and writers have been wondering whether driving in the United States might finally be going out of style. Their reasons: Overall road travel has been dropping since 2008. And there was at least anecdotal evidence that younger Americans preferred city life to suburban sprawl.
Well... it's time to revise those think pieces. This year, Americans are driving more than they ever have before. Peak car isn't upon us just yet.
Let's start with this chart, from Bill McBride of Calculated Risk. Total vehicle miles traveled has been surging of late, with the 12-month rolling average hitting another all-time high in September 2015:
The rate of growth has been particularly striking: In September 2015, vehicle travel on all roads and streets was fully 4.3 percent higher than in September 2014. Over the past year, as Reuters' John Kemp points out, vehicle traffic has grown at its fastest rate since 1997.
But, of course, some of this can be chalked up to simple population growth. There are more people in the United States with each passing year, which generally means more drivers. So a better metric, arguably, is vehicle miles per capita. To that end, Doug North of Advisors Perspective offers the population-adjusted chart below.* Vehicle miles per capita remains lower than it was back in 2005, but it's nonetheless been rising sharply over the last year:
Either way you slice it, driving has been making a comeback of late. So what's going on? Is this just a blip — or might America be returning to the faster rates of VMT growth we saw in the 1980s and '90s?
Cheap gas and a stronger economy are overwhelming the anti-driving forces
A few years ago, when car travel was declining, many people (including me) wondered how much of the drop was due to temporary economic factors — the recession, especially — that would eventually reverse and how much was due to a more lasting cultural shift away from cars, particularly among young people.
Clearly those economic factors mattered a lot. The 2008 recession had far-reaching impacts: it meant that fewer people had jobs and fewer people were commuting to work. Many younger Americans weren't making enough money to buy their own cars. There was less truck traffic on the road. But now that the economy's picking up again, driving is going up with it. That shouldn't come as too much of a shock.
The bigger surprise was the drop in gasoline prices. Between 2008 and 2014, global crude oil prices were at historic highs, north of $100 per barrel, forcing people to cut back on trips. Many experts thought this dynamic would persist indefinitely. But it didn't. By the summer of 2014, oil prices began plummeting worldwide, thanks to the US fracking boom and weaker-than-expected global demand. Today, gasoline prices in the United States are 35 percent lower than they were in 2013. That's undoubtedly contributed to the surge in car travel.
On the flip side, there are also some structural factors that are pushing people away from cars. The US population is getting older, and retirees don't tend to drive as much. What's more, there's evidence that (some) younger Americans really do prefer urban life and transit to endless driving, at least on the margins. These structural changes were taking root even before the recession, and they explain why per capita road travel is still hovering below its 2005 peak.
But whatever cultural shifts might be unfolding, they haven't been enough to offset the effects of cheap gas and an improving economy over the last year. The forces in favor of more driving are currently stronger than the forces in favor of less.
Will driving keep rising rapidly? Or is this just a blip?
This is obviously the big question. The US Energy Information Administration had been expecting car and light truck travel to grow at a sluggish 1.1 percent per year between now and 2040 — a slowdown from historical rates. Is that assumption still correct? Is this year's uptick in travel just a temporary hiccup? Or might vehicle travel grow faster than expected in the future?
Plenty of people would love to know the answer. States, for instance, have to make predictions about future travel demand to plan highway and roads. If they overestimate future demand, which they were doing back in the mid-2000s, they risk building unnecessary roads. But if they underestimate future demand, they risk not building enough infrastructure.
Then there are the climate and energy implications. As part of the upcoming international climate change talks, the US government is promising that the country's greenhouse gas emissions will fall at least 26 percent below 2005 levels by 2025. But if vehicle travel ends up growing more quickly than expected, it will be a lot harder to meet this pledge, at least without additional policy measures.
(Side note: the Obama administration has enacted CAFE standards that will crank up the fuel economy of cars and light trucks over time. That should help restrain gasoline demand somewhat. But these standards are also footprint-based, which means they're less strict for bigger cars than smaller cars. So if cheap gasoline spurs Americans to shift into SUVs and other large vehicles, as appears to be happening right now, it will likely lead to more gasoline consumption and more emissions than originally expected.)
It's genuinely difficult to know how this will all play out in the decades ahead. What will happen if, say, states or Congress push for further policies to discourage driving, like higher gas taxes, or expanded public transit? What happens if self-driving cars hit the road? Could they end up doubling road travel, as a recent KPMG report suggested? The fact that so many past predictions missed the mark is a nice reminder that over-confident statements about the future are often a bad idea.
- Our explainer on why global oil prices have plummeted.
- A look at whether cheap oil could weaken the case for Obama's fuel-economy standards. (Answer: They shouldn't ... but they might.)
- With driving down in the US, there had been a growing backlash against new highway projects. This will be a story to keep following now that driving appears to be rebounding again.
- Young people are driving less than their parents. But why?