Americans find less gas is really enough

American motorists are on a gasoline diet, but will it last? Energy analysts are delighted that US gasoline consumption has continued to decline so far in 1980, after a significant 5.1 percent drop last year.

The nature of the drop-off -- attributed mainly to higher prices at the pump -- indicates the reduction in motor fuel demand is more than a temporary development, these analysts agree. Some think the change is permanent.

Gasoline consumption fell in 1974 in response to the Arab oil embargo and a downturn in the US economy. But the decline did not last, and demand rose again in 1975.

The current situation is different, energy experts say.

"Initially, people thought the falling consumption that began last spring was solely a reaction to gas lines," says William M. Brown, director of energy studies at Hudson Institute in New York. But as gasoline supplies returned to normal, after a disruption in the world oil market caused by the revolution in Iran, consumption did not.

Since the middle of last year, higher gasoline prices have continued to encourage greater fuel efficiencies by American motorists, both in their driving habits and in the cars they buy. Early 1980 statistics gathered by the US Department of Energy (DOE) show gasoline demand down more than 4 percent in January and off more than 8 percent through most of February, compared with 1979 levels.

With prices expected to continue rising for the foreseeable future, Mr. Brown expects gasoline consumption to stay at the current reduced level.

"The price mechanism is working far better than anyone would have thought a year ago" and is encouraging fuel conservation, declares Edward Grigsby, an economist with Phillips Petroleum Company.

Phillips had been expecting US gasoline demands to begin falling in 1980. But last year's stiff increase in oil prices by the Organization of Petroleum Exporting Countries (OPEC) and supply shortages resulting from the turmoil in Iran forced strict conservation a year ahead of schedule, the Phillips executive says.

Mr. Grigsby forecasts that Americans will burn about as much gasoline this year as last, and slightly less in 1981. The important thing, he says, is that "we've dropped to a lower level of consumption, for good."

DOE is more optimistic than many private forecasters about gasoline consumption in the US. In a recent short-term energy outlook, DOE figures that the price of gasoline will rise from 20 to 40 percent this year and that demand will average 7 percent lower in 1980.

The higher prices, along with a sluggish economy and a high rate of inflation , will encourage more fuel conservation by motorists, says Scott Sitzer, one of the authors of the DOE study.

Experts differ on the long-term outlook for gasoline prices.

Mr. Brown says he believes gasoline prices actually could reverse their path and begin declining in the mid-1980s. He forecasts less demand for OPEC oil in 1985 than the average consumed over the past seven years. This will result from steady oil production increases by non-OPEC nations and will keep world oil prices rising at rates no greater than inflation, he reasons.

President Carter's phased decontrol of domestic oil prices will keep any slowdown in world oil-price increases from being directly translated into cheaper US gasoline prices over the next year and a half. But after decontrol is complete -- in September 1981 -- gasoline prices may level off and later decline in this country, according to Mr. Brown. He says it is too early to tell what impact this might have on gasoline consumption.

Mr. Grigsby agrees that a glut of oil supplies may develop on the world market in the next few years.Energy analysts estimate the world is already producing 1 million to 2 million more barrels of oil a day than it is consuming, with the balance going into storage. But he is convinced the price of crude is going to continue to escalate over the long term and says any drop in gasoline prices "is not in the cards."

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK