Saturday, December 31, 2016

Part 2 - Changing Trends Include Far More Than Electric Vehicles

This is the second in a eight-part series on gas tax, roadbuilding and electric vehicles. You can find links to the other parts at the bottom of this post.

Twenty first century trends indicate an overall reduction in the demand for gasoline. First, as baby boomers age, they are driving less. That's a lot of people not using their cars as much. Next Millennials, a generation even larger than Boomers, tend to favor walkable neighborhoods and jobs they can walk, bike or take mass transit to. We all know who the Boomers are, but the term Millennial may need a bit of explanation.

Millennials have surpassed Baby Boomers as the nation's largest living generation, according to population estimates recently released by the U.S. Census Bureau. Millennials, whom we define as those born between 1982 and 2004, now number 75.4 million, surpassing the 74.9 million Baby Boomers (ages 51-69). Millennials eschew the traditional one-car-per-person household, opting to share cars, carpool, rent or use community cars as needed, etc. Similarly, over the past 25 years, there has been a significant decrease in the percentage of young people getting a driver's license. According to the Federal Highway Administration, in 2008, 31 percent of 16-year-olds had a license, compared with 46 percent in 1983. In addition, thanks to a recent weak economy and demographic shifts, the number of miles driven in the U.S. has generally declined or been stagnant since 2007. These generational changes and attitudes are resulting in fewer miles driven, which result in less gas tax collected at the pump.

However, all of these trends and demographic shifts pale in comparison to the real gas tax killer. In the 1970s in an effort to improve gas mileage, a max highway speed of 55 miles per hour helped reduce fuel usage by improving miles per gallon by up to 20 percent. I have read that for every mile faster than 55, the average vehicle loses two percent MPG. A clearer explanation comes from While each vehicle reaches its optimal fuel economy at a different speed (or range of speeds), gas mileage usually decreases rapidly at speeds above 50 mph. You can assume that each 5 mph you drive over 50 mph is like paying an additional $0.15 per gallon for gas. Kinda makes driving across town to save $.03 per gallon a little silly.

When Congress enacted the Corporate Average Fuel Economy (CAFE) standards, they mandated auto manufacturers to improve the fuel economy across their vehicle fleet. As vehicles become more efficient, they put more miles on roads per gallon of fuel, reducing their per mile contribution to the road tax. THIS is the actual gas tax killer - government mandated fuel-efficient vehicles are getting more miles per gallon, and therefore buying less gas and paying less tax. One could say this is an argument against government mandates. I think this is precisely the role of government, to progress technology and society in an upward trend. Seriously, who’s losing? Consumers get more miles per gallon.

For example, one of the reasons I bought a 2013 VW Golf TDI was because it got 40+ miles per gallon. My insistence on purchasing a fuel efficient vehicle was economic, environmental and practical. However, by purchasing this vehicle vs. a vehicle that got a more typical 25 miles per gallon, I was legally and without anyone turning their head, paying 62 percent less gas tax by driving the Volkswagen. Essentially, I gave myself a legal gas tax break.

The Volkswagen with 40+ MPG is simply an example of how automakers are designing, building and marketing conventional fuel-burning vehicles that burn less fuel. Automakers are successfully improving engine design, using lighter materials like aluminum and improving aerodynamics, all of which improve fuel efficiency. According to the University of Michigan Transportation Research Institute, the typical car sold in March 2015 gets 25.4 miles per gallon; that’s up 26 percent from October 2007 (but still a far cry from the 40+ MPG of the Golf). 

This means that CAFE standards, changing demographics, preferences and behaviors have all left a budgetary void for road maintenance and construction. Electric vehicles have very little to do with road tax shortfalls. 

More in Part 3 about the gas tax.