Who's at fault for gas prices? Partly, it's us

Big autos, longer commutes gobbling up supplies

May 11, 2004

BY JOCELYN PARKER
FREE PRESS BUSINESS WRITER

Sorry folks: We're at least partly to blame for the ongoing pain at the gas pump.

BIG VEHICLES,
BIG DEMAND

The surge in fuel consumption over the last 14 years tracks closely with the growth in SUV and pickup-truck sales.

So you can thank the advent of the Ford Explorer and full-size SUVs like the Ford Expedition and the Cadillac Escalade for the spike in gas use in recent years.

Those vehicles, which use more gasoline than most passenger cars on the road because of larger fuel tanks, are what made the light-truck craze take off in the first place.

The Ford Explorer, for instance, revolutionized the SUV market in the early 1990s, transforming the segment from mostly low-volume vehicles to one that sold hundreds of thousands of SUVs per year.

In 1990, light trucks made up about a quarter of the nation's fleet, compared with 37 percent in 2001.

When the Explorer -- the nation's best-selling SUV -- came on line in 1990, Ford Motor Co. sold 140,509. By 2000, that number more than tripled to 445,157 vehicles.

But the Explorer was only the beginning of the truck bonanza that is fueling the demand for gas. Joining the ranks are popular pickups such as the Dodge Ram and Ford's F150, which went through major redesigns during the 1990s. While those trucks had been around for years, their newer versions popularized pickups, making them more a fashion statement than a necessity.

Chrysler's bold and brawny redesign of the Dodge Ram in 1993 "made it a fashion statement to drive a full-sized pickup instead of it being general transportation," said Art Spinella, who studies the auto industry for CNW Marketing/Research.

Then came the luxury and full-size SUVs in the late 1990s. Ford's Expedition and Navigator gave consumers yet another truck option. Buyers who were reluctant to trade in their Lincoln Town Car for an SUV, had something just as posh to move into.

And generally, the bigger the SUV or pickup, the less fuel-efficient it is. A Navigator gets 18 miles per gallon on the highway, compared with about 20 miles per gallon for an Explorer.

Like it or not, we're burning more gas than ever. Consumption has jumped nearly 24 percent since 1990. And the government says we're on track to burn another 48 percent by 2025.

Sure, there are more vehicles on the road. Between 1990 and 2001, the number of registered vehicles grew about 22 percent, according to the federal government. And the miles those vehicles traveled jumped 29 percent.

But the biggest reason consumption has risen so sharply -- after growing at a much slower pace in preceding years -- is parked in many of our driveways: The number of light trucks, especially SUVs, has spiked in the past several years, growing about 74 percent between 1990 and 2001. And since these vehicles consume more gas than passenger cars, they're likely responsible for the record level of fuel use, experts say.

The period between 1980 and 1990 showed only a 5-percent increase in fuel consumption compared with a 23.5-percent increase between 1990 and 2003.

It's not that light trucks -- which consist of SUVs, vans and pickups, aren't more fuel efficient than they used to be. Better engines and lighter materials have vastly improved fuel economy since the 1970s, a time when thirsty V8 engines dominated America's roads.

But trucks are becoming a bigger part of our vehicle mix. In 1990, light trucks made up about a quarter of the nation's fleet, compared with 37 percent in 2001, the last year for which government figures are available. Since these vehicles get fewer miles to the gallon than cars, they're driving up the amount of fuel we use.

That use is straining already tight gas supplies. Experts say prices ultimately will move higher if things don't change.

"People enjoy bigger cars and SUVs and then scream bloody murder when there are higher gas prices," said Fadel Gheit, an oil analyst with Oppenheimer & Co.

Gas inventories are about 6 percent below what they were a year ago.

Fuel consumption is so high that the oil refineries are barely keeping up with demand, experts say. The refineries already are running at more than 90-percent capacity and the chance of new ones being built is slim, said Linda Casey, a spokeswoman for Marathon Ashland Petroleum.

According to a Bloomberg report, Valero Energy Corp. Chief Executive Officer Bill Greehey recently said that there could be fuel shortages this summer because refiners can't make enough fuel to meet rising demand.

Tight supplies generally move crude-oil prices higher. For consumers, higher crude prices equate to higher gas prices because crude oil makes up 46 percent of the cost of a gallon of gasoline. The other percentages are: 12-percent distribution and marketing costs, 14-percent refining costs and 28-percent federal and state taxes. Crude hit $40 a barrel last week, a 13-year high.

Fuel costs are reaching new records even before summer.

Gas prices in Michigan are near the record levels of the summer of 2000 and the chance of them falling isn't promising. On Monday, AAA Michigan said the average price of a gallon of self-serve regular stood at $1.94 in Michigan and $1.93 in metro Detroit.

We're burning gas at a record pace largely because we're dumping cars for trucks. Passenger car growth has been mostly gradual, at only 18 percent between 1978 and 2001. By contrast, light truck registrations have soared. In 1978, there were 25.5 million light trucks on the road. In 2001, there were 84.2 million -- a 230-percent increase.

In general, consumers have opted for SUVs and other light trucks because they're big, they hold a lot of stuff and they can carry many passengers.

The rub is that many of them don't go far on a gallon of gasoline. The Ford Explorer, the nation's most popular SUV, barely gets 20 miles per gallon on the highway, compared with 30 miles per gallon for a Ford Focus, a small car.

Some SUVs -- such as the Hummer H2 -- are so large that they fall outside the limits for which the federal government certifies fuel economy.

Even so, today's light trucks use less gas than they did 26 years ago. In 1978, light trucks went 11.6 miles on a gallon of gasoline. In 2001, light trucks averaged 17.6 miles on a gallon of gas.

Last year, the United States used an average of 8.94 million barrels of gasoline a day and this year is averaging 8.8 million barrels -- at 42 gallons per barrel -- a day through March, up 2.8 percent from the first quarter last year.

Other factors involved

Some experts aren't convinced that light trucks are moving prices higher.

Ron Planting, an economist with the American Petroleum Institute, said global crude oil demand, especially in Asia, is influencing prices more than SUVs.

"If it were all due to gradual trends, we would have seen a gradual rise in prices as well," Planting said.

Some experts pointed to the explosion of the auto industry in China for the spike in worldwide demand for fuel. The Asia-Pacific region consumed 21.9 million barrels of petroleum in 2003, up from 11.5 million barrels a day in 1987.

The Organization of Petroleum Exporting Countries also has slashed oil production, which is straining supplies, Planting said.

Experts also pointed to limited refining capacity. The last U.S. refinery was built in 1976 and it is doubtful that others will be built because of stringent pollution controls and the overall public distaste for having a refinery built in a community, experts said.

"People are going to want more oil and inventories are going to be stressed to the limits," said AAA Michigan spokesman Jim Rink.

Contact JOCELYN PARKER at 313-222-5391 or at parker@freepress.com.