The Man On The Street: Less Time On The Street, More Time In The House

I came across two data tidbits recently about U.S. energy consumption — each of which was interesting independently, but collectively seemed to indicate diverging trends.

First, gasoline consumption is down dramatically, by about 30% from 2007 — a good sign that we’re getting more energy efficient.

Second, residential electricity sales in 2010 were the highest on record, up 6.3% from 2009.  Uh, wait, I thought we were getting more energy efficient?

How to reconcile this seeming dilemma?  Here’s my theory.

Gasoline consumption is the product of two factors:  fuel economy of the vehicle fleet and vehicle-miles-driven.  While the fuel economy of the U.S. vehicle fleet has definitely improved in recent years (remember “cash-for-clunkers“?), total vehicle-miles-driven has fallen as well — by almost 2% since 2007, despite an increase in the driving population.  In other words, the average person is driving at least 2% less.

This is for two primary reasons, both of which are pretty obvious.  One, gasoline prices are near all-time highs.  Two, the economy sucks; unemployment rates are near all-time highs, and those who are employed aren’t driving around for fun as much anymore because they need/want to save more money.

It used to be the case that, when the economy tanked, gasoline prices collapsed.  Witness how much gasoline prices fell just in the six month period between July 2008 and January 2009, when the economy fell off the cliff.  Not anymore:  the U.S. economy is still wheezing, and gasoline prices have rebounded and remain firm because the developing world (especially China) continues to boom and suck up just about any/all oil production/refining capacity around the world.  All the spare capacity that existed (albeit briefly) as 2008 moved into 2009 and the world’s populace stared into the economic abyss has been absorbed by the global marketplace.

With gasoline prices high, the economy weak and Americans driving less, they aren’t spending as many discretionary dollars at the shopping mall or for recreation and entertainment.  So, they must be staying at home more.  They are cooking at home more.  They are watching more TV — on the big screen LCD units they bought during the past several years.  They are surfing the Internet, tweeting and chatting on Facebook.   

All of these shifts chew up more electricity.  So, what we’re seeing is a subtle shift in overall energy consumption patterns, away from transportation energy to stationary energy, and correspondingly from oil to electricity.  

The “man on the street” is more and more becoming the “man in the house”.