Transport Fuel Consumption

BBC 'graphic' on fuel prices - notice the misplaced zero on the 'y' axis.

BBC 'graphic' on fuel prices - notice the misplaced zero on the 'y' axis.

I have read various reports today about increases in petrol prices and an apparent consequential decrease in fuel consumption. It seems set to become an issue at the election. My own views on this are simple – petrol is nowhere near expensive enough. Such a view will make me popular with no one (aside from my secret circle of ‘Green’ friends) and that is why I am (among other reasons) not a politician. But I contend that I am right and I can back up my view with real data. I can also say what I mean by ‘expensive enough’.

What is ‘expensive’?

If transport fuel (diesel and petrol) was really ‘expensive’ in some absolute sense, then changes in price would be reflected in changes in consumption. Perusing the UK data on this I find very little evidence that even quite dramatic price changes have caused even a minor tremor in consumption. Let’s look at the UK data on prices and consumption available from the UK’s statistics hub.

The data on prices is downloadable from the Department for Energy and Climate Change in an Excel spreadsheet with weekly data from 2003. The data looks something like this:

Weekly UK Fuel Prices 2003 to 2010

Weekly UK Fuel Prices 2003 to 2010

The price data shows a general trend rise of about 8% per annum since 2003  and a significant peak in 2008. Did this affect fuel consumption? This data is available form Her Majesty’s Customs and Excise who keenly count each litre of fuel dispensed. The data for the last 10 years looks like this:

Transport Fuel Consumption 2000 to 2010

Transport Fuel Consumption 2000 to 2010

The data are annualised and so do not show any detailed response to the weekly data on fuel price. However it is clear that the above inflation trend rise in fuel prices has not caused a trend decrease in fuel consumption. Notice in particular the absence of any decline in consuption in 2008 when fuel prices peaked. There is evidence of a fall in fuel consumption in the last year or two, but this is not because of fuel prices – this is (presumably) because of the recession.

So?

When transport fuel prices cause people to change habits and use less, then fuel will be in some objective sense be ‘expensive’. We are not yet close. Personally I think fuel prices will need to practically double before people will change their habits. It is important to understand that the ‘habits’ are not vices. People have made rational choices about how far to live from their place of work based on the cost of houses and the price of fuel. When this balance changes then people will make different decisions. Similarly business have made decisions about locations of factories and warehouses based on similar considerations. I cannot stress enough that despite the fact that I do want fuel prices to rise, I sympathise with the people who will pay the price. They are not paying the price for their own poor choices, but for their own rational responses to a market that has been left to its own devices.

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3 Responses to “Transport Fuel Consumption”

  1. Mel Williams Says:

    I agree with you that the cost of automotive fuel (petrol and diesel) should be considerably higher than it is (via “green” taxation to fund research and establishmen of viable alternatives, perhaps). But to assert that “… a fall in fuel consumption in the last year or two … is not because of fuel prices – this is (presumably) because of the recession” is, possibly, an over-simplification.
    What is clear fom the graphs you use, is that, while the price of both diesel and petrol has risen steeply, consumption of petrol has fallen quite steadily, while that of diesel has, until recently, risen. There is obviously something different about patterns of diesel and petrol usage.
    Graph 3 indicates a generally falling trend in petrol consumption between 2003 and 2009, from approximately 28 000 million litres consumed in 2003 to approximately 22 000 million litres in 20o9.
    Consumption of diesel, however, rises between 2004 and 2008, and then begins to flatten off.
    The graph indicates that overall fuel consumption was increasing until 2007, but driven by the increased consumption of diesel, not petrol, and has been declining since 2007 (with consumption in 2007 being approximately 57 000 million litres, compared with, perhaps, 53 000 million litres in 2010). It is the pattern of diesel consumption that changed.
    It may be that the recent recession contributes to the levelling-off in the consumption of diesel, but one would need to look elsewhere for an explanation of the more established trend of falling petrol consumption.

    • protonsforbreakfast Says:

      The trend from petrol to diesel is easy to understand: diesel is much more economical than petrol, and in recent years, the disadvantages of diesel – poor power versus engine speed and incomplete combustion leading to dirty fumes – have been overcome. In general diesel cars are now perfectly acceptable with excellent reliability.

      My assertion that the recent fall is not due to prices is justified by the absence of a fall in consumption when the price rose to its previous peak. That peak was accompanied by widespread protests, but in fact it made no difference to consumption. A recession is accompanied y a general reduction in economic activity and almost every activity at some point involves transport fuel.

      Overall I think I am justified in saying that the evidence supports my assertion: transport fuel prices are not high enough to affect consumption.

  2. Mel Williams Says:

    The peak in price for both petrol and fuel occurred in 2008. This coincides with the levelling-off in diesel consumption. The consumption of petrol continued to fall, as it had been doing since 2003. These two events constitute a fall in overall fuel consumption that correponds to the 2008 peak in cost. After the peak-price there was only a short dip in price, before it began rising again. Consumption of petrol has not increased, and diesel-use continues to fall. Fuel consumption had begun to fall during 2007. The forecast for the UK’s economy was still bullish at this time http://news.bbc.co.uk/1/hi/business/6213496.stm and the UK didn’t enter recession until January 2009.
    I don’t think, therefore, that one can ascribe the fall in fuel consumption over the last 3 years simply to the recession.

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