ONE TOWN SQUARE: at the intersection of peak oil, climate change, and land use

The Federal Highway Administration’s Traffic Volume Trends reports travel on U.S. roads and streets was down 0.9% for November 2011 as compared with November 2010. Cumulative travel for 2011 was down 1.4% from 2010 through November.

In the early ’80s, VMT (moving 12 months total) stayed below the previous peak for 39 months. Currently VMT (moving 12 months total) has been below the previous peak for 48 months – a full 4 years – and the trend shows no sign of reversing any time soon.

Could it be that the all-time peak in vehicle miles traveled (VMT) in the U.S. – August 2007 – is now securely behind us?

In Oregon, vehicle miles traveled (VMT) was down 0.4% in November 2011 compared to November 2010. Cumulative VMT for 2011 is down 2.0% from 2010. VMT in Oregon has been down every month in 2011 compared to 2010.

With VMT down, it’s not surprising that Americans continue to consume less gasoline. Total petroleum deliveries fell 1.1% in November compared with November a year ago, pulled down by a 1.8 percent decline in motor gasoline demand.  It was the lowest level of November consumption for gasoline since 2000.

Total petroleum deliveries fell 1.2% to an average of 18.9 million barrels a day in 2011 compared with 2010. Except for 2008, this was the largest drop in annual domestic deliveries over the past decade.

If petroleum deliveries are any indicator, VMT will prove to continue to drop in December 2011 – and substantially. December 2011 petroleum deliveries were down 5.9% from December 2010, declining to an average of 18.6 million barrels per day, the lowest level in 15 years. The Federal Highway Administration’s report for December can be expected confirm that VMT for 2011 as a whole is down over 2010.

Oil prices in 2011 averaged record highs, despite global economic woes.

Brent crude, the world oil benchmark, averaged $111 per barrel, breaking the previous record of an annual average high of $100, set in 2008. That spike contributed to a huge global recession. West Texas Intermediate (WTI) rose even more, averaging $95/barrel, an increase by 20% over its 2010 average price of $79. WTI traded at a hefty discount to world oil prices throughout the year – as much as $26/ barrel.

Global automotive market intelligence firm Polk forecasts worldwide new vehicle sales in 2012 will rise 6.7% over 2011 volumes to 77.7 million vehicles. Polk expects China to make the largest contribution to global sales growth for new vehicles, with an anticipated 16% increase over 2011.

Polk expects that U.S. light vehicle sales will increase by 7.3% to 13.7 million vehicles. As this chart by Calculated Risk shows, sales are struggling to return to levels reached almost two decades ago, when the U.S. population was ~50 million less than today.

Polk is optimistically forecasting U.S. auto sales to return to “normal” levels of greater than 16 million vehicles per year by 2015 – and for global auto sales to approach 100 million by 2016.

Where is the gasoline to power all these new cars going to come from? Despite record high global oil prices, global oil production is refusing to budge. Members of the Organization of the Petroleum Exporting Countries (OPEC) – which supply ~42% of global production – produced an average of 30.74 million barrels per day in December 2011.  OPEC production has been fluctuating within a ~5% band, as has global production.

Production of crude plus condensate has been basically flat since 2005, with new sources just barely managing to compensate for a 5% decline per year from existing production. Any increase in total liquids over that time has largely come from increases in NGPLs and other liquids.

Total liquids production worldwide increased 0.5% per year from 2005 to 2010 – but that includes low net energy fuels such as biofuels. However, the global supply of net oil exports available to importers other than China and India (what Jeffrey Brown calls Available Net Exports, or ANE) fell at a rate of 2.8% per year from 2005 to 2010. Brown expects oil available for import by most of the world to fall by 5% – 8% each year for the rest of the decade.

In Saudi Arabia (now the world’s second largest oil producer after Russia), production has been declining.  Only a dozen or so of the 54 oil producing nations in the world are still increasing their oil production.

If global economic growth, feeble though it may be, manages to continue in 2012, we can expect even higher oil prices. Even if people are willing and able to pay higher prices, there are limits to global supplies of oil that can be refined into motor fuels. What good will all these new cars be, if there is not enough fuel to power them?

It’s a good bet that rosy forecasts for U.S. and global auto sales will prove to be powered by nothing more than fantasy.

The Federal Highway Administration’s Traffic Volume Trends reports travel on all roads and streets was down 2.3% for October 2011 as compared with October 2010. Cumulative travel for 2011 is down 1.4% from 2010.

In the early ’80s, VMT (rolling 12 months) stayed below the previous peak for 39 months. Currently VMT has been below the previous peak for 47 months – almost 4 years. And the trend in the rolling 12 months VMT is still down.

Could it be that the all-time peak in vehicle miles traveled (VMT) in the U.S. – August 2007 – is now in our rear-view mirror?

In Oregon, vehicle miles traveled (VMT) was down 2.7% in October 2011 compared to October 2010. Cumulative VMT is down 2.1% from 2010. VMT in Oregon has been down every month in 2011 compared to 2010.

With VMT down, it’s not surprising that Americans continue to consume less gasoline. Total petroleum deliveries (a measure of demand) fell 1.1% in November compared with November a year ago, pulled down by a 1.8 percent decline in motor gasoline demand.  It was the lowest level of November consumption for gasoline since 2000.

AP reports the typical American household will have spent a record $4,155 on automobile fuel this year – 8.4% of what the median family takes in, the highest share since 1981.

Don’t expect 2012 to be any better. More likely, fuel will be getting even more expensive.

Brent crude will average near $111/barrel for 2011, even more than in 2008 when oil prices hit a peak of $147.50/barrel. Some analysts think oil prices will average a bit less in 2012, perhaps averaging $105/barrel. Others analysts predict that oil prices will be even higher than in 2011, projecting WTI (which have consistently been significantly lower than Brent this year) to average $100 per barrel next year, eclipsing 2011?s average of about $95/barrel. Oil-price.net projects WTI prices to be at $112 a year from now.

Nobody is expecting oil prices to drop, or at least not much. Here’s a big reason why: Saudi Arabia, the world’s lowest-cost producer, requires a price of $91/barrel just to break even.

The glory days of cheap gas are over for good. Our memories aren’t playing tricks: remember gas wars, gas at 19.9 cents a gallon? In my Fiat 850 Spyder – $2000 new, right off the lot, and 50 mpg – driving seemed virtually free. We were young and immortal, oil was infinite, and the world was empty and ours for the taking. There were no bounds, no limits. Vietnam and then the first gas crisis in 1973 were the first intimations that the imperial project – to stride over not just the nations of the world, but over Nature herself – was destined to go awry.

A few were prescient. Limits to Growth was published in 1972, foreseeing humanity bumping up against constraints to both sources and sinks by the first decades of this century. Way back in ’56, Shell geologist M. King Hubbard predicted that U.S. oil production would peak in 1970 – a prediction that proved spot on.

Porter Stansbury at The Daily Reckoning posts this chart showing “real wealth” per capita in the U.S. since the mid-’50s.

Note that “real wealth” in the U.S. peaked about the same time as U.S. oil production. Coincidence?

Stansbury measures “real wealth” using a standard commodity index (the CRB) up to 1975 and gold post-1975 (when gold began to trade freely). When peak oil arrived in the U.S., Nixon took the U.S. off the gold standard. With the U.S. kissy-face with the Saudis, the dollar became the petrodollar.

I’m not sure I would put a lot of faith into this measure of “real wealth” – but the correlation of peak wealth with peak oil is provocative. There’s no question that the U.S., indeed the entirety of Earth, has become a poorer, more degraded home for humans since 1970, despite decades of “growth” and “progress”. That degradation doesn’t even begin to show up in our accounts.

Around 1970, reality arose and smacked us across the face.  Humanity has been working through the range of responses – denial, anger, bargaining, depression, not yet acceptance – ever since.

The Federal Highway Administration reports travel on all roads and streets was down 1.5% for September 2011 as compared with September 2010. Cumulative travel for 2011 is down 1.3% from 2010.

Bill McBride at Calculated Risk has this chart showing VMT back to 1971.

McBride observes the current downward trend in VMT is unprecedented:

In the early ’80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.

Currently miles driven has been below the previous peak for 46 months – so this is a new record for longest period below the previous peak – and still counting!

September VMT was below last year’s numbers for the seventh straight month.

In Oregon, vehicle miles traveled (VMT) was down 0.7% in September 2011 compared to September 2010. Cumulative VMT is now down 2.0% from 2010. VMT in Oregon has been down every month in 2011 compared to 2010.

Indications are VMT in the U.S. continued to fall in October and November. Platts reports U.S. retail gasoline demand fell 4.5% year-on-year for the week ending November 18; the four-week rolling average was down 3.8% from the same period last year. The average retail price of a gallon of regular gasoline was 18.1% higher than last year.

Falling VMT in the U.S. should not be a surprise. Driving is dependent upon the availability liquid fuels. Jean Laherrère reports global all liquids production has been on a bumpy plateau since 2005 around 87 Mb/d, with a variation of 2 Mb/d (which is equal to the accuracy of the data, about the difference between EIA, IEA or OPEC values). He has posted an updated graph of historic and projected production at The Oil Drum.

Laherrère expects this plateau to continue for a few years before a significant decline takes place. But recall, peak oil is not synchronous: the peak in oil consumption arrives earlier in some countries than in others. In the U.S., the peak oil consumption is clearly in our rear view mirror. That peak oil is manifested in declining VMT should be expected.

Auto sales came in at an annual rate of 13.26 million in October – slightly below forecasts of 3.4 million. Calculated Risk posts this chart.

Automakers are now on pace to sell about 12.8 million vehicles for in 2011, up from 11.6 million last year.

Light vehicle sales are still poking along at levels typical of three, four, even five decades ago, and last seen two decades ago, as apparent in this chart, again from Calculated Risk.

In 1991, the population of the U.S. was 50+ million less than it is today – and there were 35 million fewer licensed drivers, as seen by comparing statistics here and here.

Auto sales have been on a downward trend for a decade now. Oil consumption in the U.S. has been on a downward trend since 2005.

The above graph, posted by Stuart Staniford at Early Warning, shows the EIA’s data since 2000 – both the weekly and the monthly series.  According to Staniford, the monthly series is believed to be more accurate, but the weekly series is more up to date. The weekly data is certainly noisier.

The downward trend in auto sales and oil consumption is consistent with the continuing downward trend in vehicle miles traveled (VMT). VMT in the U.S. reached a peak in January 2008 and has been trending downward now for almost four years.

The Federal Highway Administration reports travel on U.S. roads and streets was down 1.7% for August 2011 as compared with August 2010. Cumulative travel for 2011 was down 1.3% from 2010.

Bill McBride at Calculated Risk posts this chart.

McBride observes the downward trend in VMT is unprecedented:

In the early ’80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.

Currently miles driven has been below the previous peak for 45 months – so this is a new record for longest period below the previous peak – and still counting!

In Oregon, vehicle miles traveled (VMT) was down 1.0% in August from August 2010. Cumulative VMT is now down 2.2% from 2010.

There are some indications that travel may have picked up a bit in September. After falling a revised 0.5% in August 2011, the American Trucking Associations’ advance seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 1.6% in September.

However, the long-term trend in truck tonnage remains down from peak 2005 levels.

Also, the American Petroleum Institute reports total petroleum deliveries (a measure of demand) totaled 19.9 million bpd, an increase of 2.5% in September over September 2010.  While motor gasoline demand was up only slightly by 0.3%, distillate demand reached a record for the month.  On a year-to-date basis, gasoline demand was down 1.3% from 2010.

Shell CEO Peter Voser is warning that over time oil supply and demand fundamentals are going to tighten significantly:

Oil output from fields in production declines by 5 per cent a year as reserves are depleted, so the world needed to add the equivalent of four Saudi Arabias or 10 North Seas over the next 10 years just to keep supply level, even before much of an increase in demand.

So how have we been doing at discovering new reserves? Not nearly good enough.

All the easy stuff has been found. We basically stopped finding conventional super-giant high production rate oil fields forty years ago.

Despite the best technology and soaring prices, each year the amount of new oil reserves discovered is a fraction of that found in the 1960s. Oil production flattened in 2004. In 2010 consumption exceeded production by over 5m barrels per day for the first year ever.

In the charts above, a large part of the difference between consumption and production is accounted for by such things as biofuels, oil made from coal and other non-conventional sources, which are not included in the production figures. The rest of the difference is from the running down of world oil stocks.

The questions now facing us are how long can global oil production be held on its plateau, and how fast will the subsequent decline be?

The stall in global oil production in the face of strong demand from less developed countries is having a profound consequence: while the Chindia  (China & India) region, and many other developing countries, have been able to increase their net oil imports, most developed oil importing countries, such as the U.S., are being forced, via price rationing, to take a declining share of a falling volume of Global Net Exports.

In the U.S., oil consumption has fallen by 10% since peaking in 2005. Less oil consumption translates into fewer car sales . . .

. . . and less driving.

Vehicle miles traveled (VMT) in the U.S. plateaued in 2005 and have been trending down ever since.

Oregon is no exception to the national trend. Vehicle registrations in Oregon peaked in 2007 . . .

. . .  and were down to 3.23 million in 2010.

Gasoline consumption in Oregon and Washington has been on a plateau since 1999.

Sightline reports VMT in Oregon and Washington have been on a gently declining plateau since 2002.

The trend should now be clear, in Oregon as well as the nation as a whole. The times of ever-growing traffic on our roads are over for good. Instead, our future holds declining fuel consumption, declining number of cars and trucks, and declining vehicle miles traveled.

It’s time to start planning for that, rather than for continued growth.

Light vehicle sales were at a 12.12 million SAAR in August, up 5.3% from August 2010 and down <1% from the July 2011 sales rate of 12.2 million.

The above chart, posted by Bill McBride at Calculated Risk, shows car sales poking along at levels typical of three, four, even five decades ago, and last seen two decades ago. In 1991, the population of the U.S. was 50+ million less than it is today – and there were 35 million fewer licensed drivers, as seen by comparing statistics here and here.

Globally, 35 million new vehicles were registered last year. So even with the collapse in U.S. auto sales, the U.S. still accounts for over a third of the global market. And with 240,000,000 light vehicles on the road, the U.S. maintains almost one-quarter of the global light vehicle fleet. Tom Whipple at the Falls Church News-Press points out that in the U.S there is now a motor vehicle for every 1.3 people and at least one for every licensed driver. But in an era of little or no economic growth, limited employment opportunities and rising energy costs, it is highly unlikely that there will be anything approaching 240 million registered vehicles in the U.S. 25 years from now.

Last month, Wards Auto published a story pointing out that the world’s motor vehicle count for the first time exceeded one billion – which explains why global oil prices remain extraordinarily high even while economies continue to struggle. Brent crude is trading at almost $116/barrel ($115.80 as of 9/7/2011), and is trading at a near record premium of $25.70 to WTI crude at ~$90/barrel ($90.10 as of 9/7/2011).

The Federal Highway Administration reports travel on all roads and streets was down 1.4% for June 2011 as compared with June 2010. Cumulative Travel for 2011 was down 1.1%.

Bill McBride at Calculated Risk observes the dip in U.S. vehicle miles traveled (VMT) is unprecedented:

In the early ’80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months. Currently miles driven has been below the previous peak for 43 months – so this is a new record for longest period below the previous peak – and still counting!

VMT in Oregon was off 1.4% from June 2010, and is now off 2.3% for the year. The drop in driving is continuing into August: the New York Times reports the four-week moving average in gasoline consumption is down 3.8 percent from last year.

While light vehicle sales in the U.S. almost surely have seen their peak, and VMT may have seen its peak, that’s not true for the globe as a whole. The auto trade journal Ward’s reports the number of cars and trucks on roads around the world has for the first time exceeded one billion, as global registrations jumped from 980 million units in 2009 to 1.015 billion in 2010. Registrations in China exploded in 2010 by 27.5% to more than 78 million vehicles. China now has the world’s second-largest vehicle population (after the U.S., with 239.8 million units), pushing it ahead of Japan, with 73.9 million units, for the first time. India’s vehicle population underwent the second-largest growth rate, up 8.9% to 20.8 million units. Brazil experienced the second largest volume increase after China, with 2.5 million additional vehicle registrations in 2010.

While the market in the world’s developed countries is pretty saturated, that’s not true in the world as a whole. In the U.S., the vehicle-to-person ratio was 1:1.3 among a population of almost 310 million. Italy was second with 1:1.45. France, Japan, and the U.K. followed, all of which fell in the 1:1.7 range. In China, the ratio was 1:17.2 among the country’s more than 1.3 billion people. India, the world’s second most-populous nation with 1.17 billion people, saw a ratio of 1:56.3.

With growing demand from non-OECD countries, it should not be surprising that global oil prices remain stubbornly high. As Stuart Staniford has pointed out at Early Warning, peak oil is not synchronous: the peak in oil consumption arrives earlier in some countries than in others. In the U.S., the peak oil consumption is clearly in our rear view mirror.

In many non-OECD countries, oil consumption is still growing, while global crude production has peaked and all-liquids production is struggling. The consequence: falling demand in OECD countries no longer suffices to bring global oil prices down to a point where economic activity can return to normal. Rather, the reality of multiple, endemic economic crises erupting and festering around the globe has become the new norm.

A recent post observed that vehicle miles traveled (VMT), both nationally and in Oregon, are trending down rather than up. The 2008 peak in VMT nationally has yet to be regained. The question was begging to be asked: if VMT is going down rather than up, is the Columbia River Crossing really needed? And since its financing rests on projections of robust traffic increases over the coming decades, are proponents’ financing plans pie in the sky, or will this project rather prove to be an albatross around taxpayers’ necks?

Unfortunately, the Federal Highway Administration does not contain information specific to either the I-5 crossing or the 205 crossing. Clark Williams-Derry in a post at Sightline Daily notes that the Washington Department of Transportation’s latest Annual Traffic Report does contains information specific to the two crossings.

First, it’s important to point out that the report shows that annual VMT on Washington roads reached a peak in 2007 that has not been regained. And traffic has barely grown over the last decade: VMT in 2010 was a miniscule 0.44% above that in 2000. [See p. 48 of the report.]

Williams-Derry posts this chart showing traffic volume on the two existing Columbia River bridges over the past decade . . .

and observes:

Since the new millennium, though, annual traffic growth has averaged about 0.5 percent.   Even if you exclude the declines in 2008, traffic grew at only about 1 percent per year starting in 2000.That’s for the two highway bridges together.   If you look just at the I-5 span across the Columbia, traffic volumes in 2010 were just a hair above what they were in 1999.   That’s more than a decade with essentially no growth in traffic!!

Traffic volume over the two bridges is down a combined2.2% since the 2007 peak. Traffic volume over the I-5 crossing alone is down 3.1%. [See pp. 67, 161.]

In the face of stagnate traffic volume growth over the last decade and declining traffic volume over the last four years, how many billions are we willing to gamble – faced with peak oil, rising gasoline prices, and a faltering economy – that the recent trend will be reversed and the presumed need for additional road capacity will in fact materialize?

Cities as a whole have been estimated to produce up to 80% of global greenhouse gas emissions. Thus, decisions on the structure, including the building types, density, location and public transport, establish the long-term frames for the greenhouse gas emissions of a community.

But a new study from Finland – Implications of urban structure on carbon consumption in metropolitan areas – finds that, when it comes to carbon emissions, urban structure doesn’t make much of a difference.  The study looked at dense center cities , where apartment buildings dominated housing and diverse public transport was available; and “rural” cities with a lower density, a high share of detached houses, and weaker public transport. The study considered the effects of density, dominant building type, private driving and income on the carbon consumption.

Surprisingly, the study found the carbon consequences of urban density and dominant building type to be insignificant, based on a life cycle assessment: there proved to be no clear correlation between urban density and carbon consumption. Despite the identified connections between carbon consumption and urban density, it seems that the effect of density on carbon emissions is rather low, and that other factors override the effect.

The researchers seemed to have stumbled upon something they hadn’t anticipated or designed the study to analyze: what really seems to matter is income. As incomes rise, people engage in more carbon-spewing activities:

The rest of the carbon categories, the consumption of goods and services, reflect clearly the effect of income on the emissions. However, this part of the carbon consumption was not the focus of this study, and also cannot be analyzed in depth with the presented hybrid model. The model shows that traveling abroad and the use of services grow as earnings grow * * * but regarding daily consumption, it is not possible to differentiate amount and quality.

One interesting notion about the relation of income and carbon consumption is that emissions seem to grow as income grows, but with decelerating speed. * * * It seems that the share of savings increases rather rapidly as earnings grow.

The slight growth in energy-related carbon consumption found in less dense areas compared to the denser metropolitan core is overwhelmed by the high correlation of income and carbon consumption.

The results of the study may not be directly applicable in the U.S. Consider that in the E.U., the transportation sector generates 20% of greenhouse gas emissions, while in the U.S., transportation accounts for 33% of total greenhouse gas emissions [in Oregon, 34% of emissions are from the transportation sector; in California, 36%]. In Finland and the rest of Europe, the effect of private transport on overall carbon consumption per capita is quite weak when all emissions related to driving are calculated, including car manufacture, deliveries and maintenance of vehicles (the share of fuel combustion of all all emissions related to private transport is 50–70%, the rest being dominated by emissions related to car manufacture and maintenance). Thus, growth in trip generation due to a decline in the density of the city structure has a relatively minor effect on the overall carbon consumption. Here in the U.S., the contribution of fuel combustion to total emissions may be much higher.

The studies’ authors offer a modest suggestion.

When solutions for low-carbon living * * * are searched for, consumption-based assessments of emissions are essential.

Now here’s a truly revolutionary idea: if we are to emit less, we’ll have to consume less. No more growing the economy; rather, we’ll have to shrink the economy. It’s that simple. It’s the economy, stupid.

Evidence continues to mount suggesting that the seemingly inexorable trend of ever-increasing travel on U.S. roads is faltering.

As we noted earlier here, VMT for 2011 are now down 0.1% from last year and are still well below the pre-recession peak reached in 2008.

Truck traffic on U.S. roads is down, too. The Ceridian-UCLA Pulse of Commerce Index, based on real-time diesel fuel consumption data for over the road trucking, fell 0.9% on a seasonally and workday adjusted basis in May, after falling 0.5% in April. The index has now declined in four of the first five months of 2011, and in eight of the past twelve months. As seen in this chart posted at Calculated Risk, truck traffic remains well below pre-recession levels.

Based on an estimate from Autodata Corp, light vehicle sales were at a 11.79 million SAAR (seasonally adjusted annual rate) in May. That is down 10.2% from the sales rate last month (April 2011), although up 1.5% from May 2010. Again, Calculated Risk has posted a great chart showing U.S. light vehicle sales since 1967.

U.S. light vehicle sales remain at levels last seen about 20 years ago, when the population of the U.S. was 50+ million less than it is today – and there were 35 million fewer licensed drivers, as seen by comparing statistics here and here.

The number of cars and light trucks on U.S. roads appears to be falling, as the number of light vehicles scrapped is substantially outnumbering new vehicle registrations. The overall scrappage rate in the U.S. is about 6.1%. There are about 238,000,000 passenger vehicles in the U.S. (BTS data as of 2008 – the most recent data available – not counting motorcycles or trucks with more than four wheels). With the U.S. scrappage rate at 6.1%, about 14.5 million vehicles are being removed from U.S. roads each year.

The U.S. appears to have entered a new paradigm when it comes to oil consumption, as seen in this chart posted at Mish’s Global Economic Trend Analysis.

As seen in this chart at the U.S. Energy Information Administration website, U.S. oil consumption peaked in 2005.

In 2005, the U.S. burned through 20,802,000 barrels of oil per day. The rate of consumption fell to 18,771,000 b/d in 2009, then rose a bit to 19,148,000 b/d in 2010. Oil consumption in 2011 is faltering again, and is now behind the pace set in 2010.

Maybe it’s not so smart to be squandering billions on new road and bridge projects?