Change in Vehicle-Miles Traveled in the United States and Nominal Spot Oil Prices, 1971-2022

Change in Vehicle-Miles Traveled in the United States and Nominal Spot Oil Prices, 1971-2022

Sources: Federal Reserve Bank of St. Louis & US Department of Transportation, Federal Highway Administration.

There is an inversely proportional relationship between energy prices and changes in travel demand, as evidenced by the United States. When oil prices rise sharply, growth rates in vehicle miles traveled (VMT) plummet, which is also linked with a concomitant recession and the related reduction of travel demand. During oil shocks (1973, 1979-80, and 2008), changes in VMT are negative. Counter shocks (a significant drop in oil prices) tend to have limited impacts on mobility trends, implying that a sharp decline in oil prices does not boost vehicular travel in a significant manner; it simply reduces their operating costs.

Another significant trend has been the declining annual growth rates of VMT in time, with average figures of 4% in the 1980s, 3% in the 1990s, and convergence towards zero in the first decade of the 21st century. This is partially linked to the maturity of the diffusion of the automobile and its related mobilities. It could be argued that peak mobility in the use of the automobile may be on the horizon. Still, a sharp drop in oil prices in 2015 was associated with vehicle-miles growth rates of around 2%. It is unclear if a shift towards hybrid or electric vehicles will undermine the long-term relationship between petroleum prices and mobility. The main reason is that the energy prices, including electricity, usually evolve in tandem with oil prices.

The Covid-19 pandemic created significant disruptions and contradictions concerning prior patterns. Initially, both oil prices and vehicle miles dropped significantly as lockdowns reduced travel demand and oil prices crashed due to expectations of enduring low demand. Afterward, the demand bounced back, with VMTs to pre-pandemic levels. From 2021, oil prices surged mainly due to quantitative easing, which is expected to have an impact on VMTs.