Peak car

Today’s Fin (paywalled unfortunately) includes the neat neologism “Peak Car” from transport consultant John Cox, making the point that car travel in developed countries is unlikely to increase further. I’ve tended to disagree with Cox in the past: for example, with this 2006 piece, which stated that public transport is in terminal decline. This was just at the beginning of the recent resurgence in public transport use, particularly noticeable in Brisbane. Still he’s right about the peak, or more precisely plateau in car travel, matching what’s happening to oils supplies. I’d take it further and say that the inevitable (given no growth in supplies and increased demand from China and India) decline has probably already begun.

Calculated Risk points to this report from the US Dept of Transportation, showing the first yearly decline in several decades, and includes a graph which shows that the recent decline follows several years of flattening

47 thoughts on “Peak car

  1. Re. John Cox, I noted this statement:

    The car is also a safer transport mode in this age of terrorism.


    Anyway, I would love to see those figures linked with (US) population growth and BNP growth and perhaps also petrol prices to get a real impression of what is going on here. There is a stagnation between 1980 and 1983 which would link with the second oil crisis and the recessions in the early 1980s.

  2. It would be nice to compare that to congestion too — whilst petrol prices are a big deal, it would be interesting to know how much the plateauing is also due to increased frustration with just sitting in traffic as cities get more packed. You can see this in the really crowded cities of the world — many people are certainly rich enough to drive wherever they want whatever the petrol price, but don’t due to the annoyance factor.

  3. Americans are currently foaming at the mouth about the prospect of US$4/gallon which equates to just A$1.10/L. Apparently there will be rioting on the streets and demands for government to !do something! when “gas” crosses this threshold. Meanwhile in Italy they’re paying A$2.41/L and still driving like Italians.

    The fact is westerners can afford to pay a lot more for petrol. In coming years there will be lots of hang-wringing, whingeing and cries of “how can they justify it?!”. There will be endless enquiries into “price gouging” and oil company executives will be asked to explain themselves to Senate committees (as we saw this week in the US).

    Sure, people might actually give fuel economy a moment’s thought when its time to buy a new car, and they might cut out the odd trip here and there, but at best we’ll see a plateauing of demand, rather than any significant reduction.

    When things get really tough the politicians will cave and start cutting fuel taxes. We’re already seeing this with McCain, Clinton and Nelson, and now Rudd seems to be wavering. Once fuel taxes are cut to zero it won’t be long before some idiot starts promising fuel subsidies.

    Meanwhile in the Middle East and Asia fuel subsidies are holding prices artificially low and demand is exploding. I read somewhere that Asia and the Middle East are responsible for 80% of the recent increase in demand.

    All of this means the price of crude has a lot of headroom. Demand for petrol is already very inelastic and with politicians diluting the price signal by slashing taxes demand will remain strong.

    If the peak oilers are half right about the supply situation the price of crude is headed to the moon. I can’t see us changing our ways until oil hits $300/barrel.

  4. You misunderstood John Cox’s 2006 piece. He said ‘public transport is in terminal decline in NSW’. Morris Iemma and his camorra have given that statement strength many times over.

  5. When things get really tough the politicians will cave and start cutting fuel taxes. We’re already seeing this with McCain, Clinton and Nelson, and now Rudd seems to be wavering

    Well that happened even sooner than I expected, and no-one is more cynical about politicians than me: Labor to review GST on petrol excise

    THE federal government will investigate whether GST charged on top of the petrol excise should be scrapped.

    Senior federal government minister Jenny Macklin says the application of the GST to petrol will be looked at under a review of the taxation system.


  6. At what point do they apply a carbon tax to reduce emmissions and what difference will it make considering price rises to date?

  7. No evidence that a carbon tax will reduce emissions (just fuel inflation) and, the greatest cost in owning a vehicle is still depreciation

  8. No, rog, there’s plenty of evidence from the 1970s that price increases will reduce consumption.

    We want to reduce consumption. If it’s done via a carbon tax, there’s money available to spend in Australia on whatever we choose to spend it on.

    If Oz chooses the opposite path, we’d be in effect funding hotel construction in Bahrain.

  9. No SJ, prices did not reduce consumption it was the contracting economy that did so.

    The world is facing a choice, an increase in growth or an increase in poverty and energy is critical.

  10. SJ, if the worst thing about Australia’s oil consumption was funding hotel construction I wouldn’t be particularly concerned about it.
    It’s almost certainly funding far more sinister ends – including terrorism, the illegal arms industry, and the repressive regimes and entrenched inequalities in many Middle Eastern countries. But more than anything else it’s further increasing our dependence on a resource that it’s simply no longer safe to rely on – one because it’s a resource whose supply is unlikely to keep up with demand for too much longer, but secondly because it’s a resource increasingly supplied by politically unstable parts of the world. If, for instance, Saudi Arabia’s monarchy were to be overthrown by some extremist religious group, there’s little doubt they would choke off oil supplies to Western nations, quickly bringing our economies to a stand-still. Or if Iraq’s troubles worsened considerably, and its oil supplies consequently dried up, we’d be in for a genuine supply shock (as it is, unless Iraq’s situation improves considerably, it seems unlikely we’ll be able to avoid oil shortages anyway sometime in the next decade – a fact admitted by the head of the I.E.A.)
    Then of course, thirdly, because it’s a resource that generates long-term pollution that we don’t fully know how to detail with.

    Why is it, I wonder, that it’s in Australia and the U.S., two of the Western nations with the cheapest petrol in the world, there’s talk everywhere of the need to reduce prices? Europeans have been accustomed to high petrol prices for years, and I’m not aware of any outcry over recent rises, or politicians promising to do something about them.

    Further, if Rudd, still at some absurd levels of popularity in the polls, is feeling the need to bend to populist demands now, then seriously, heaven help us. If there’s ever a time that you should be able to implement policies that will actually genuinely help reduce the pain of petrol prices – i.e. policies that will help us reduce our petrol usage – it’s now.

  11. Well said wizofaus. The fact that they’ve caved to populism 6 months into their first term with Rudd’s approval at 70% does not bode well.

    We want to reduce consumption. If it’s done via a carbon tax, there’s money available to spend in Australia on whatever we choose to spend it on.

    I’d say the chance of liquid fuels being included in a carbon tax or ETS is zero. The bidding war to cut fuel taxes has already begun.

    The world is facing a choice, an increase in growth or an increase in poverty and energy is critical.

    rog, its increasingly likely we won’t have a choice about oil. If you don’t believe me (or the other lefty, do-gooder, bleeding hearts here) perhaps you’ll believe the CEO of Oil Search.

  12. This is surely a testable statement, SJ and rog are arguing two separate causes for the reduced consumption following the oil shocks: a ‘contracting economy’ versus ‘prices’. Which was it? Was it both? Anyone?

    Of course, looking to history might not help that much here – the peak oil arguments are getting stronger, and there’s simply got to be less consumption in the future, that is a physical inevitability. Will a carbon tax on petrol make it easier or harder to do?

  13. I don’t think we’re likely to see a significant tailing off in car use in Western countries in the medium term.

    If petrol prices go high enough, people will just switch to hybrids (probably diesel-electric in many cases), and to pay for it forego the 16-speaker audio/video system and fridge in their Toyota Kluger.

    Or LPG. Or natural gas. Ultimately, pluggable hybrids (the latest reports say that the key technology – the batteries – are meeting their range and durability tests).

    There’s just too many options for reducing fuel bills.

  14. Not the fridge, I’ll give up anything, but not the fridge!

    I reckon CNG is a good medium term option for Australia. Better still, CNG hybrids. Govt needs to figure out how to stop people filling up at home though.

    If we did that gas prices would go through the roof and we’d get to “peak gas” a lot sooner.

  15. I still have to ask…if they can do it in Europe, why can’t they do it here?

    This interview is telling:

    HK: At that time, my proposal of turning the Viennese Kartnerstrasse into a pedestrian zone was predicted to lead to its economical death. Later I was told that cycling was totally unwanted by the Viennese and that speeding up public transit by laying cobblestones near the stops would cause motorist uproar. All that was allegedly unpopular. Yet the Viennese have embraced these ideas and the city’s living standard rose in international rankings. You can’t only satisfy voters wishes. You don’t give drug addicts tax-free drugs, even though the desire certainly exists.

  16. Carbonsink, I don’t really think the ability to fill up at home would make much of a difference. If the use of CNG vehicles became widespread, demand, and therefore price, would rise regardless of whether people filled up at home or not.

    Admittedly I haven’t done the numbers, but I am skeptical whether our natural gas supplies are large enough to make a serious dent in oil consumption without running into the same price issues we are facing with oil.

  17. Re 15: “a contracting economy” is an abstract. The concrete phenomena was rising prices and rising unemployment (and middle eastern politics).

  18. I think we need to distinguish between overall transport demand and the use of cars, and between short term and long term effects. All evidence is that travel demand is highly inelastic in the short term, and is determiend by population and employment scale and distribution. For example, evidence suggests that if you double travel cost you might get a 5% drop in travel in the short term, in the absence of alternative modes of travel. Mode choice may vary with costs and choices available, so if oil prices rise and public transport is available, people will change modes. Publci transport patronage has risen 6% to 12% in every Australian capial city in the past two years, and is now constrained from futher growth by system capacity in most capitals.

    In the long term there is evidence that travel demadn is more elastic, as people change their cars, jobs and even place of address. Long run enasticites are around -0.3.

    I disagree with ROGs comment that a carbon tax will make no difference. However the effect may take time. It will induce some people to change travel mode (to PT, walk or cycle) and others to buy more economical cars. The latter trend is already happening in Australia, as evidenced by declining sales of six cylinder cars.

    So have we seen peak cars? I doubt it, because population is still growing and all of our cities have been built around cars for over 50 years. But we may have seen peak petrol-based cars. In the long term, we will have to find a new power source. Either that or build a lot of buses and trains and prohibit further urban sprawl.

  19. Carbonsink, I don’t really think the ability to fill up at home would make much of a difference.

    Yeah but there’s no fuel excise on gas in the home. It would be lot cheaper to buy a home compressor and fill up your CNG vehicle at home than fill it up at the servo. The Govt would need to bring the gas pricing into line.

  20. Currently home gas supply is a regulated industry with price controls, I doubt CNG cars would change that.

    If CNG cars added sufficiently to demand, the suppliers would need to go to the regulators and apply for an increase in the domestic tariff.

    In practice, I think gas prices are influenced far more by export prices than by fluctuations in local demand.

    You don’t see the per unit charge on your home gas bill go down in summer when demand is presumably lower.

  21. “Yeah but there’s no fuel excise on gas in the home.”

    Carbonsink, there’s no fuel excise on natural gas at all. Servos would presumably get their CNG from the same reticulated gas supply as households do.

    “The Govt would need to bring the gas pricing into line.”

    Yes it would. A spike in demand in a price-controlled commodity is a recipe for an instant shortage. In WA we’re already looking at domestic gas shortages because the price controls have resulted in under-investment in supply for the last few years.

  22. Ian: that depends on where you live.

    Until recently, gas on the Australian east coast was not an internationally tradeable commodity.

    However, the development of LNG terminals on the east coast is changing all that; any substantial new supply will have the option of selling on the global market, and so we’ll have to pay world prices to buy it.

    Even so, at US prices for natural gas and throwing in the full excise, GST, and energy conversion factors, natural gas costs roughly the equivalent of 80 cents per litre.

    If you optimized the tuning of a vehicle to run on natural gas, it would actually be more thermally efficient on gas than on petrol (for the technically minded, the octane rating is about 130, so you could tweak the compression ratio or turbo boost right up). It’s probably worth the equivalent of another 8 cents a litre or so off the price.

  23. There are also technical issues with the reticulated gas supply when demand increases significantly. The WA government program to convert the metropolitan bus fleet to CNG ran into some teething problems when the reticulated supply was unable to deliver gas at a sufficient rate for the refuelling schedule. The supply pipes needed to be upgraded and additional storage installed.

    If home-fuelled CNG vehicles became popular, that problem would reappear on a much larger scale. It might require a complete overhaul of the gas delivery system.

    Home users might find compressors affordable, but they’d probably balk at having significant CNG storage facilities at home. As would the dangerous goods regulators.

  24. Home users might find compressors affordable, but they’d probably balk at having significant CNG storage facilities at home. As would the dangerous goods regulators.

    Out in rural areas where you can’t get “town gas”, bottled LPG is fairly ubiquitous for heating purposes, and doesn’t seem to represent any greater danger than piped natural gas.

    I’d also point out that a large number of households have an even more dangerous explosive stored in large quantities in a much less safe container known as a “jerry can”… 🙂

  25. Carbonsink, there’s no fuel excise on natural gas at all

    I’m pretty sure CNG one of the fuels that will have excise phased in to 2011, I know LPG will soon have excise.

    Regardless, the government would need to sort out the taxation and pricing issues before a major transition to CNG.

    Even so, at US prices for natural gas and throwing in the full excise, GST, and energy conversion factors, natural gas costs roughly the equivalent of 80 cents per litre.

    CO2 emissions per km are very low also. A big price advantage for CNG (at least in the short term) would be a good thing and should speed the transition.

    We should be hearing something from Marn about this soon. Isn’t he supposed to be working on some kind of energy security plan for Australia? God help us if he recommends CTL.

  26. Fair enough about the LNG tanks Robert, although I suspect daily driving habits might require somewhat more substantial storage.

    I don’t actually hate CNG, just engaging in some devil’s advocacy…

  27. To return to “Peak Car”, is it possible that the US has simply reached saturation in terms of car ownership and usage?

    There’s been a tendency to assume demand for cars and for roads was almost completely inelastic – increase the supply as much as you want and there will still be consumers crying out for more.

    But with total population growth slowing, is it possible the US has simply reached the point where virtually everyone who wants a car has one?

  28. The usual situation with a contracting economy is that money is tight, growth slows, jobs are lost, people go broke and everybody gets cranky.

    There are problems with compressed energy, near me a winery blew up when a spark ignited the alcohol vapours.

    Gas bottles are normally OK if there is a solid connection; if they use a flexible rubber type hose leakage can occur which can lead to an explosion (vapours never just burn they explode.)

    Petrol in a tin does not explode however vapours are heavier than air and can be triggered by a spark – a common occurence in petrol powered cruisers when somebody turns the key to start the motor.

    Of course the devil is in the details; if the connection is not made properly leakage can occur. Most people dont know that gas thread is a reverse thread – most bottle suppliers change over and reconnect the bottles themselves – its when others start fiddling that trouble occurs.

    Usually suburban houses have a “fire wall” between the garage and living areas so if a fire did start you have time to get out. Once the fire is in the roof its all over red rover and the fire brigade just hose the ashes.

  29. I think a steel jerry can, military style is the best fuel container you can buy.

  30. rog Says:

    No SJ, prices did not reduce consumption it was the contracting economy that did so.

    wilful Says:

    This is surely a testable statement, SJ and rog are arguing two separate causes for the reduced consumption following the oil shocks: a ‘contracting economy’ versus ‘prices’. Which was it? Was it both? Anyone?

    Calculated Risk’s follow up post has another graph that clearly shows that rog is wrong.

    A larger version of the graph is here.

    The gray vertical bars mark recessions, i.e., periods of economic contraction. The drops in miles driven preceed the recessions, not the other way around.

  31. This EERE Chart shows use of oil in transportation.

    I’d guess about half of that is for automobile passenger transport, as the “light truck” category includes:
    – pickup trucks used for business
    – pickup trucks used for both business & passengers
    – (misnomered) SUVs

    Prices at the pump are obvious, but there’s an amplification effect:

    – I’d assume that the different categories have different elasticities in short and long terms [can anyone point to a good paper on elasticity differences by category?]

    I.e., individual consumers may still have to drive to work, but will combine trips, carpool, lessen vacation distances, etc … and buy a more efficient car the next time.

    But there are many short-term fuel uses that seem totally inelastic [farm machinery, railroads, some trucking] where people end up increasing rates, adding fuel surcharges, etc [or $15/bag for American Airlines] and can pass their costs along.

    Hence, if there is a big spike in gas price, that is highly visible to consumers, but there is some lag time as other indirect price increases start to hit. One would then expect that to put even further pressure on consumer gas usage.

    Can anyone point to good studies that model tahe costs that people pay, not at the pump, but indirectly this way?

  32. Historically higher oil prices precede a recession. The cost and availability of energy will be critical to an expanding global economy.

  33. That EERE chart is interesting – industry appears to be a more efficient user of oil than ‘recreational’

  34. At what prices does coal-to-oil look profitable? At some point it will. A little bit of value adding could soon make sense to Australia’s coal industry – of course it’s just as climate policy says we should cut back. Insatiable demand for liquid hydrocarbons, a bit of demand for climate change mitigation – not hard to predict how it will go. Oil-to-coal isn’t going to be anything like as profitable as any remaining easy oil but what else is?

  35. Ken

    I don’t know the answer on the economics of coal to oil but in terms of energy efficiency and greenhouse emissions, it is a disastrously bad process. We must avoid going down that road. There is also a consdierable investment and time penalty (new refining plants required – it is a completely different process to convefntional oil refining.) LNG and public transport investment is far preferable. Either way, lag times mean we must act fairly soon.

  36. As I understand it, if current prices – or even some relatively substantial fraction of them – are maintained, CTL is an immensely profitable business. However, the greenhouse issue is the real problem.

    The process CO2 from coal-to-liquid is in a form where it’s relatively easy to purify for storage, so if geosequestration is ever going to work, it’ll work for CTL.

    However, the uncertainties around the carbon price, and whether geosequestration is feasible, are a big dampener on investing in CTL.

    The other problem is that I don’t think that people with billions of dollars to invest are convinced that oil prices will stay high enough to justify the investment. They think that a combination of new production from offshore wells, tar sands, natural-gas-to-liquid (easier, cheaper, and less environmentally damaging) – not to mention conservation – will drop the oil price back – maybe not to $25 per barrel, but something much lower than it is now.

    But there are clearly some who do think CTL is a goer; a company called Linc Energy is building a pilot CTL plant and their share price has gone gangbusters recently. So at least some investors are betting on CTL. Whether they’re smart players or mugs remains to be seen…

  37. I don’t see any real will to cut back on coal, certainly not in Australia. No “serious” politician can suggest it and not be howled down as anti-prosperity. Carbon taxes or equivalents are of course something to do sometime in the future. It’s going to take some serious changes in mindsets to see Carbon taxes introduced here in anything but the most minimal (ie not effecting coal use and exports) way. Since (as any ice manufacturer and dealer will attest) negative consequences of something willingly purchased are wholly the responsibility of the end users, it’s not our worry. Anyway, China’s emissions are much more than ours so it’s their problem, and we can feel fully justified in not doing anything much about GHG emissions at home, which will be more comfortable with a gov’t flush with coal gigadollars. Throw a minute fraction of those mining royalties at CCS research, expand coal mining and exports on the assumption it will work. Hell, just expand coal mining and exports because it’s worth lots of money. Deny global warming has a real basis, definitely avoid getting educated on the issue and when it gets to court battles you can honestly say you had no real knowledge of any negative consequences.

  38. There was an equally well argued piece from Ken Davidson in The Age today arguing that we must invest in public transport instead:

    In a sense both pieces can be right. Infratructure spending in Australia in the 1990s was low, hence in a catch up phase there is a need to increase spending on both roads and rail. Assuming that politicians don’t provide enough funds though, there is a pressing need to increase PT’s share of funding. Hence overall I prefer Davidson’s view.

  39. I suugested earlier that the US may actually have hit saturation in terms of demand for cars.

    If that is the case, and I have no way of proving whether or not it is, then additional road-building might actually reduce congestion and improve fuel efficiency. As opposed to the usual scenario where it typically just meets previously unsatisfied demand and stimulates more car use meaning we rapidly end up right back where we started.

  40. Re: additional road-building

    In some places, it is very difficult or very, very expensive to build much in the way of new roads.

    1) One is reminded of the Big Dig in Boston.

    2) Manhattan?

    3)San Francisco? (or much of the Bay Area)? Byt the way, one of the main routes from San Jose to San Francisco is Rt101. As can be seen SF Bay Area +1m flood map, +1meter laps at Rt 101 (and other major roads) if undiked. of course we’ll build dikes, but does somebody think it’s a good long-term investmentfo example, to build a second level freeway atop Rt 101, at large expense?

    There are places where modest road improvements can be useful, like better intersections, but the current action around here is trying to direct the development as infill development along rail and light-rail lines.

    A much, much better idea is to rethink the incredible implicit subsidies for cars, i.e., read UCLA Prof Don Shoup’s excellent book “The High Cost of Free Parking” about all the perverse incentives. The idea is not to do away with cars, but to manage them in ways that still preserve their convenience, but encourage more beneficial long-term behaviors.

    One approach is the use of street sensors, wireless sensor networks, and smart meters to better manage parking space inventory, do dynamic pricing (in effect by value), get people not to cruise around looking for spots, help people find spots, etc [depending on the city.] San Francisco has been working on such for a few years, with Streetline Networks. {Disclosure: I’m an advisor there.]

    This is an example of the use of Moore’s Law, cheap electronics, sensors, and information systems to better energy. This category of efficiency improvement is no silver bullet, but one of the useful little silver buckshot.

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