Mobility and gasoline supplies for the next ten years

Abstract

O ne of the more intriguing aspects of the energy situation to date has been the U.S. appetite for motor gasoline. For years, gasoline consumption has consti tuted the largest single component of energy use. Equal to nearly 18 percent of our total energy demand, it is the one energy characteristic that distinguishes our society from the other industrialized nations. At an average consumption rate of about 7 million barrels per day in 1979, motor gasoline use alone exceeded the total annual oil requirements of every other country except the U . S . S . R . But of all the major oil uses in the U.S., gasoline for transportation is the least sensitive to price. For this reason, changes in the transportation sector can have broad and significant impacts on the economy, a point often overlooked by those designing conservation policy. Those policy issues regarding transportation are also always thorny because they involve individual lifestyles, personal needs, and freedom. Most studies suggest that for every 10 percent increase in the price of gasoline (not including changes due to inflation), the quantity demanded falls by only 1 to 2 percent in the near term.1 But even at this low level of sensitivity, it appears that recent price changes have gone a long way toward modifying the transportation sector of the U.S. economy. And this market reaction is occurring in spite of many obstacles. These obstacles do not involve scarce resources, though resources are always relatively scarce. The obstacles do not involve the greed of consumersin fact, the greedier the consumer, the more effective the price adjustments can be. The biggest obstacles do not even involve the Middle East, though that assessment is always subject to change. The obstacles, as I see them, are along the Potomac, where non-price fine-tuning of energy markets can bring this price adjustment process to a crawl. In the 1980s, however, major savings of gasoline should be achievable without interfering with economic growth and personal freedoms. These savings already appear likely and may be one of the more optimistic developments in chang-