January 05, 2006
2005: the oil shock that didn't bite?
All but one of the recessions in the United States since World War II have been preceded by a dramatic increase in oil prices. Did we escape unscathed in 2005?
Oil prices started out 2004 about where they had been four years earlier, and then began a rocky ascent that has now left them about 50% higher than they had been in 2000. Up until the summer of 2005, the primary cause of this price increase had been surging world demand.
If all that happens is that energy becomes more expensive, we shouldn't expect to see huge economic consequences. Insofar as the price increases were themselves the result of growing demand and rising incomes, people do not make any sudden or dramatic changes in how they go about their lives.
Historically, the big economic effects of oil price shocks seem to come when there are sudden shifts in the pattern of spending, for example, if consumers stop buying the kinds of cars that the U.S. auto manufacturers are relying on for sales. This response by consumers involves not just the price of gasoline, but also their overall perceptions of the source and likely persistence of the price changes along with expectations about the consumers' own income prospects.
I argued that the nature of the response of American consumers to gasoline prices changed in the late summer and early fall, when we saw a dramatic decline in consumer confidence and profound shifts in American vehicle purchases. The loss in consumer confidence has fortunately proven to be relatively short-lived. The University of Michigan's index of consumer sentiment was up to 91.5 for December, back to the value of August, and the Conference Board's related measure shows a similar strong improvement.
And how about autos? As the graph below shows, American SUV's had done quite well in June and July in terms of number of units sold thanks to company incentives, though this came at an enormous financial loss to GM and Ford. The intertemporal effects of these incentives makes it difficult to judge just how dismal were the September through November sales figures. December sales were back to mediocre (a distinct improvement over "dismal"), though sales at GM were still down 10% compared with the previous year. Light truck sales for all domestic manufacturers were down slightly for 2005 as a whole compared with the previous year.
The financial challenges at GM remain severe. Although bankruptcy may have been used by Delphi, America's biggest auto supply manufacturer, to renegotiate with its workers, it could be a disaster if GM were to attempt the same trick-- long-term trust and the psychological component seem absolutely critical for selling a car. And although longer term problems are no doubt partly to blame for GM's difficulties, if we do see the other shoe drop in 2006, I would argue that the energy price shocks of 2005 also played an important role.
Another way in which historical oil price shocks may have contributed to economic downturns is through the response of the Federal Reserve to the shocks. Thinking they have to fight the inflation, the Fed has often raised interest rates in response to an increase in the price of oil. Even if the Fed quits now with its rate hikes, we could see a significant economic slowdown in 2006 as a result of the actions the Fed has already taken.
Did we dodge the bullet of the 2005 oil shock? Perhaps yes, but I would say that it's too early to tell for sure.
And then there's always the oil shock of 2006...
Posted by James Hamilton at January 5, 2006 02:40 PMdigg this | reddit
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Tracked on January 9, 2006 10:06 AM
Perhaps it did bite a bit: Holiday sales were not all that great, a bit better for high end retailers, weaker for the likes of Walmart. Anecdotally, there were a lot of pre-Xmas sales going on, just to move the inventory.
As price elasticity disappears, we will know more.
Posted by: Stormy at January 5, 2006 04:26 PM
according to an article in the FT today->overall music sales are down, even with digital distribution included.
Posted by: nate at January 5, 2006 06:25 PM
Here's the vehicle sales data directly from GM and Ford.
GM - December 2005 vehicle sales
Ford - December 2005 vehicle sales
The sales data by vehicle model deserves a closer look. A few points of interest.
Posted by: Movie Guy at January 5, 2006 07:05 PM
Nice post - I'm especially interested to see the light truck sales graph. Does seem plausible some of it is cannibalization of future sales, but it also seems like the high prices have at least stopped growth in SUV sales.
As oil shocks go, this has been a very mild one, if it's one at all. There's a production graph at
and you can see that there's in effect a bumpy plateau in production starting in summer 04, but there are not major actual dips in production (so far). It's not like the 73 shock or the 80 shock where there were large percentage decreases in production. I expect the very moderate economic impact so far is due to the very moderate nature of the shock.
Posted by: Stuart Staniford at January 6, 2006 12:13 AM
Note that in the third quarter -- at the recent price peak --nominal consumer spending on energy was a smaller share of total consumer spending (PCE) then it was at the bottom in the 1970s. In the 1970s energy went from rougly 6% to 9% of total nominal spending, so far this cycle it has gone from 4% to 6% of nominal spending.
Previously when Detroit got it wrong they corrected by cutting ouput. But now after converting their production model to one of almost all fixed and little variable costs Detroit reacts to excess inventories much more by cutting prices rather then cutting output-- a logical response to the change in their costs structure.
Is this one reason recessions have become less frequent?
Posted by: spencer at January 6, 2006 06:23 AM
Spencer makes a good point with specific stats: the economy today may not be as dependent on oil today vs. historically.
For the economy to slow more than experts expect, there may need to be another, interactive variable in addition to increases in oil prices. One might find such a variable (possible but not definitive: interest rate increases, size of rate increases, frequency of rate increases). One also might find an offsetting variable (one that signals the economy will grow ). Look how much the federal government is spending. So who knows.
Posted by: nate at January 6, 2006 08:38 AM
It's one thing to say that all but one of the recessions have been preceded by oil shocks; but it is another to imply that most oil shocks lead to recessions. It's like... well, I won't even try to dig up some mundane analogy, you are all smart enough to think of one yourselves. Logically they are different statements.
Posted by: Hal at January 6, 2006 10:42 AM
What about steel or copper prices? High steel prices have usually preceded recessions. When you have a boom, you get high commodity prices and recessions follow booms. So simple. Energy can hit the economy but then it is physical supply that matters. Energy supply doesn't necessarily show in prices but primarily through investments.
We will see what happens. Recession signs are strong. One of them are this kind of discussions. If we think that we dodged the danger it is quite likely that we didn't.
Posted by: TI at January 6, 2006 10:58 AM
"Did we dodge the bullet of the 2005 oil shock?"
The pain has only been delayed by massive liquidity pumping by the Fed and buy-it-forward consumption financed by 2nd mortgages from cheap rates. This massive new debt not was used to create new wealth, GDP growth has been due to consumption, not investment (savings), and the credit bubble will only make the eventual correction worse.
Professor, in all your years, have you ever seen such extreme dis-equilibria?
Posted by: John at January 6, 2006 11:28 AM
Many of us have not yet recovered from the Y2000 recession, so we are just deeper at the start of 2006 than at the start of 2005.
Notice the Bush road show carefully avoided Ohio and Michigan.
Posted by: save_the_rustbelt at January 6, 2006 11:45 AM
It may be the case that 2006 will become known as the year when fuel costs are pushed to the consumers.
Let's start with mail and packages. FedEx, UPS, DHL, and the U.S. Post Office are raising their rates. FedEx, 3.5 percent; UPS, 3.9 percent on ground shipments and 5.5 percent on air shipments; DHL home delivery, 6.5 percent (average); and USPS, 5.4 percent, beginning on Sunday.
General transportation. Indications are that rates will be rising across the board.
Cable television. Up.
Beverages, food, and some local services. Up.
This may be the year to track all price increases as they occur, as opposed to relying solely on the CPI.
Posted by: Movie Guy at January 6, 2006 02:50 PM
not sure what to make of Chicago Liquidators:
Posted by: nate at January 7, 2006 10:07 AM
"Did we dodge the bullet of the 2005 oil shock?"
I agree with John's comment.
Price increases were absorbed by increased access to consumer credit. That kind of response may be o.k., if a source of the price increase is transient. But, what if the source is not transient and is indeed increasing in size? For instance, consumer & corporate demand for oil in developing countries like India and China are not flash in the pan events, but rather parts of longer term trends.
I don't think the bullet can be dodged over the intermediate term. For oil prices to come down, supply must increase or demand must decrease. Is additional drilling going to be permitted off our coasts, or in Alaska? Of course not. Environmentalists and NIMBY-proponents won't permit it. Or, are we, in the aggregate, going to moderate our oil consumption by driving more fuel efficient cars and by living in smaller houses? Of course not. Forgetting about the SUVs, in my commute to work, every day, I see Hemi models, AMG tuners, BMW M3s/M5 models, and/or Audi RS models! These drivers are going to change their lifestyles? Call me a skeptic. The net effect is that the bullet won't be dodged, unless an alternative cost-effective fuel source comes to the fore.
Posted by: Suresh at January 7, 2006 05:35 PM
I checked out your web site. Good job with the forums. Will try to read more of the subject threads as time permits.
Posted by: Movie Guy at January 7, 2006 08:24 PM
What do you think Chicago Liquidators symbolizes about the economy and inflation?
People have substitutes. Companies face competition. If prices increase on a product, people can switch to other products. For example: If a consumer does not like the increase in the cable bill, the consumer can get cable channels in other ways.
It will be interesting to see official inflation measures in the future, and what is driving the changes.
Posted by: nate at January 8, 2006 01:06 PM
I did look at your post at your web site. An interesting web site, by the way. Quite a variety of interests!
It appears that Chicago Liquidators is intent on gaining market share of the liquidation auction market. The billboard ad gives them enough visibility to attract smaller clients. And that may be the goal. The 'bigs' would already know their operation and services.
I know that I have purchased plenty of new auto parts from the Chicago area which were part of a major liquidation operation. New OEM auto parts that appeared to have been stopped in route to production facilities. I have two large boxes of GMC Typhoon leather wrapped steering wheels that were manufactured in Mexico which ended up on a parts auction in the Chicago area. The fellow I purchased these from is always chasing parts deals. And I purchased these rare parts for a small fraction of their OEM cost.
Another friend in Chicago, Marty McGuire, and his father own a large shipping box supply business. Perhaps they are providing some boxes to Chicago Liquidators or their clients. I will ask. The boxes are flying out of that operation.
I have seen similar liquidation operations in Atlanta and elsewhere in the Southeast. A number of retail level clearinghouses have popped up in the past few years. Visits revealed the scale of the liquidation effort. The stockage is similar to a Dollar Store (Big Lots and others), but the effort isn't focused on a 'clean appearance' retail operation. Mostly odd lots of whatever goods. And the products cover a broad range of dissimilar goods.
I believe that a profitable liquidation operation could be built around an internet web site, complete with photos. Of course, many of the 'offers' from internet sites probably represent the next lower level of such liquidation efforts. Same for eBay sales.
I expect that the visibility that Chicago Liquidators has offered gives us a glimpse into the future. Liquidation is another form of discount store sales, and it may be moving into the mainstream. A well designed store/internet operation could do quite well.
I have always wondered what Wal-Mart does with its excess goods stock. Down at the store level, it appears that Wal-Mart just lets the stuff sit and work its way through price cuts. I've seen some old goods stay on the shelf longer than I would have kept it there. At the warehouse stockage level, Wal Mart may be unloading some of the inventory through liquidators. But they manage the contract stockage well enough to avoid most liquidation experiences.
Posted by: Movie Guy at January 8, 2006 02:28 PM
Liquidators: Gotta move the goods. That it has made the billboards is not a good sign. Not to be alarmist, but if billboards were back in 1929, I would expect that kind of message posted everywhere.
In a word, overproduction and deflation.
After a well-designed internet liquidator store, then what?
Posted by: Stormy at January 8, 2006 08:51 PM
Absent a separate automobile post for January (month of auto shows), I'll post this here:
Here's an overview and photos of GM's two-mode hybrid SUV coming next fall.
25% fuel savings. And that's without any mention of including a six-speed dual overdrive transmission.
2007 Ford Shelby GT500
Here's the production version of the 2007 Lexus LS 460 and LS 460L (replacements for the 430 series).
I prefer the concept wheels, grill, and exhaust surround. I also like the concept exterior paint.
The grill is the issue. Step up to the concept grill and the car takes on a better appearance. Then tear off the junk badging on the trunk lid (heat it off, that is). The look begins to work.
The smaller concept projector headlights also look cooler.
Clicking back and forth between the production and concept photos shows me that one of my biggest gripes about the past, current, and future Lexus flagships is the grill. It's a boring, wimpy design. Popping in the concept version changes the whole look of the front end.
Posted by: Movie Guy at January 8, 2006 09:45 PM
GM in China may offer hope - very not sure.
The Associated Press/SHANGHAI, China
By CHRISTOPHER BODEEN
Associated Press Writer
"GM is China's top-selling foreign automaker"
Posted by: nate at January 9, 2006 09:26 AM
The GM hybrid offers 25% savings on the questionable premise that most driving is at highway speeds (they claim so themselves). Possibly in Detroit, where road building could easily keep up with the shrinking population, but in few other metropolitan areas; where rush hour commutes ON HIGHWAYS are stop-and-go.
Posted by: M1EK at January 9, 2006 10:50 AM
US Petroleum Consumption Hits Record Highs in 2005
Consumption of petroleum in the US reached record highs in 2005, climbing 1.7% over 2004 levels to an average 20.7 million barrels per day, according to data from the DOE’s Energy Information Administration.
Here's to hoping that hybrid-electric, hybrid-diesel, and plug-in hybrid technologies come on-line in a cost-effective way soon!
Posted by: Suresh at January 9, 2006 01:16 PM
It would be interesting to compare Dec 2005 to prior Decembers.
Even though Dec 2005 consumption may not indicate big behavior changes... People may be able to change behavior and curtail consumption: more car pools, alternative forms of entertainment (more sail boats and less motor boats), more public transportation.
It will be interesting to see how consumption of oil changes in year 2006.
Posted by: nate at January 9, 2006 01:43 PM
M1EK -- The GM hybrid offers 25% savings on the questionable premise that most driving is at highway speeds (they claim so themselves). Possibly in Detroit, where road building could easily keep up with the shrinking population, but in few other metropolitan areas; where rush hour commutes ON HIGHWAYS are stop-and-go.
Let's clarify a few points.
In the article posted above, GM didn't state that the fuel savings of the full size SUV hybrids will occur only at highway speeds. Quite the contrary. GM is citing city stop-and-go and highway fuel improvements with the hybrid design, and provides sufficient information to explain how this can be achieved.
GM statements and reporter summarization do not support what you are saying. That is not to say that you didn't read such information elsewhere. I suggest a careful read of the article in order to understand how the GM two-mode hybrid system really works. It's not a bad overview.
Secondly, EPA determines the average fuel consumption ratio and testing methods, and that info is spelled out at http://www.fueleconomy.gov/ along with the testing parameters.
"City: Represents urban driving, in which a vehicle is started with the engine cold and driven in stop-and-go rush hour traffic. The driving cycle for the test includes idling, and the vehicle averages about 20 mph."
"Highway: Represents a mixture of rural and Interstate highway driving with a warmed-up engine, typical of longer trips in free-flowing traffic. Average test speed is about 48 mph and includes no intermediate stops or idling."
"In the 1980s, an EPA study found that drivers were typically achieving lower fuel economy than predicted by EPA laboratory tests. As a result, EPA required the laboratory-derived city and highway MPG estimates posted on the labels of new vehicles to be adjusted downward by 10 percent for city estimates and by 22 percent for highway estimates to better reflect the MPG real-world drivers can expect."
The hybrid article
"The Chevrolet Tahoe Two-mode Hybrid combines the functionality and comfort of a full-size SUV with a two-mode full hybrid system that optimizes fuel efficiency in both city and highway driving, the way most Americans use their vehicles," said Tom Stephens, group vice president, GM Powertrain."
"The Vortec V-8 powered Tahoe Two-mode Hybrid is expected to deliver a composite fuel efficiency improvement of 25 percent when combined with Active Fuel Management? cylinder deactivation technology."
"GM?s two-mode full hybrid system in transit buses has been established as the starting point for the GM-BMW-DaimlerChrysler collaboration. The design integrates proven automatic transmission technology with a patented hybrid-electric drive system to deliver the world?s first two-mode full hybrid."
"The two-mode is patented hybrid technology with two modes optimized for city and highway driving. In the first mode, at low speed and light loads, the vehicle can operate in three ways: electric power only, engine power only or in any combination of engine and electric power. When operating with electric power only, it provides all the fuel savings benefits of a full hybrid system. Leaving the engine shut off for extended periods of time and moving under electric power at low speed is key to reducing fuel consumption in heavy stop and go traffic."
"The second mode is used primarily at highway speeds. In addition to electric assist, the second mode provides full eight-cylinder engine power when conditions demand it, such as when passing, pulling a trailer or climbing a steep grade. The second mode integrates sophisticated electronic controls, such as Active Fuel Management, cam phasing, and late-intake valve closure, allowing even more efficient engine operation."
"Two-mode system innovations allow for more compact packaging because its compact and powerful electric motors are designed to fit within the approximate space of a conventional automatic transmission ? an efficiency advantage compared with today?s typical single-mode systems that rely on much larger electric motors."
"A sophisticated controller determines when the vehicle should operate in either mode of the two-mode drive system. Input from the controller determines the necessary torque for the driving conditions and sends a corresponding command to the engine and electric motors."
"We have several additional proprietary innovations that will make the two-mode system even more capable in high power-to-weight ratio vehicles, such as in SUVs and full-size pickups ? innovations that combine our two-mode full hybrid with our extensive capability in automatic transmissions and electronic control systems," said Stephens. "We believe it is the most efficient full hybrid design for a broad variety of vehicle configurations."
To suggest that GM can not achieve significant fuel improvements in city driving conditions appears to dismiss the multiple modes of operation available with GM's two-mode hybrid drivetrain design. The first mode is designed for city and stop-and-go driving. The second mode is applied to achieve fuel savings at highway speeds, along with VVT and AFM improvements.
If GM also achieves 25% fuel savings with its entry level 4.8 liter engine, that will positive news.
Posted by: Movie Guy at January 9, 2006 05:01 PM
If the majority of GM's pickups and SUVs end up with AFM and VVT engines, and a reasonable portion also have hybrid drivetrain technologies, then GM is moving in a positive direction in terms of fuel savings.
If GM does provide fuel savings on the 5.3 liter and 6.2 liter engines on the order of 25%, that's quite an achievement.
2005 and 2006 Chevy Tahoe (5.3 liter)
City: 15 mpg
Hwy: 20 mpg
2007 Chevy Tahoe (5.3 liter; available this week)
City: 16-17 mpg
Hwy: 22 mpg
* Approximate figures based on 10% improvement with AFM (advanced fuel management) [formerly called displacement on demand] and variable valve timing (VVT). City figure may not hold up unless the AFM also applies to low engine demand at slower speeds and idle.
2008 Chevy Tahoe hybrid (5.3 liter)
City: 18.75 mpg
Hwy: 25 mpg
* Approximate based on 25% improvement (10% of 25% from 2007 AFM and VVT improvements, plus hybrid two-mode technology)
** Throw in the six-speed transmission (dual overdrive) and we could be talking 26-27 mpg on the highway. Not bad considering the weight, and available torque.
Perhaps we will see 30 mph full size pickups and SUVs within five years. And 35-45 mph small and mid-sized pickups and SUVs within the same period.
If the existing global fleet of gasoline automobiles are redesigned to achieve 25%-30% fuel savings with similar vehicle weight, then we're moving in the right direction.
Posted by: Movie Guy at January 9, 2006 09:21 PM
Nate, you wondered about how December 2005 compared with past Decembers.
I don't have an answer directly on point for you. However, the DOE has a "Petroleum Products Supplied by Type, 1949-2004" table at http://www.eia.doe.gov/emeu/aer/txt/ptb0511.html. That table shows yearly consumption totals. It looks like only in 1974-75, 1979-1983, 1985, 1989-1991, and 2001 did we see any decline in consumption year over year. According to http://inflationdata.com/inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp, in 1974, the nominal yearly average oil price jumped from $4.75 to $9.35; in 1979, the nominal yearly average oil price jumped from $14.95 to $25.10; and in 1989, the nominal yearly average oil price jumped from $14.87 to $18.33. So, ignoring the current massive credit availability for the moment, it would appear that we as American consumers moderate our consumption in the face of sticky high prices, and continue to do so for some time even after nominal prices fall.
Posted by: Suresh at January 10, 2006 04:58 AM
Southwest Airlines had interesting use of fuel hedges. This may have mitigated the bite from fuel.
It looks like United Airlines did not hedge fuel. From reading the paper and listening to UAL management, you might think it was the pensions and not the lack of hedges that hurt UAL.
Posted by: nate at January 10, 2006 08:17 AM
This move may cause a round of price reductions by some other auto manufacturers.
GM to cut prices as much as $2,500
Cuts cover 57 of the automaker's 76 models in North America
Mark LaNeve, GM's vice president of sales and marketing, told reporters that the program will lower the manufacturer's suggested retail price by as much as $2,500 on some vehicles, but the average decrease will be $1,300.
GM will lower prices on all Chevrolet, Buick and GMC vehicles and most Pontiac vehicles starting Wednesday, LaNeve said. Saab, Saturn and Hummer will be excluded because GM feels they are already priced appropriately, he said.
LaNeve said GM believes it will make money despite the markdowns because it has new products coming to market, and it will be spending less per vehicle on incentives, which have sometimes topped $4,000 per vehicle.
Under the deal, a 2007 Chevrolet Tahoe [available this week] will have an MSRP of $33,990 for a model with a 5.8-liter, V-8 engine. That is $2,000 below the 2006 Chevrolet Tahoe, even though the new Tahoe has better fuel economy, Chevrolet General Manager Ed Peper said.
GM said the new pricing will make it easier for consumers to compare GM vehicles with their competitors on the Internet, where two-thirds of car shoppers are now doing research. High incentive spending had made it more difficult for consumers to figure out the price of a vehicle.
Peper said the 2007 Chevrolet Impala LS will sell for $20,990, $1,000 less than the previous model. A comparable Toyota Camry sells for $23,320, while a comparable Honda Accord sells for $25,650, Peper said.
Posted by: Movie Guy at January 10, 2006 09:38 AM
EPA to announce revised mileage rules for vehicle window stickers on Thursday
Drivers would get lower -- but more accurate -- miles-per-gallon estimates on cars they buy starting with the 2008 model year under new testing standards that are expected to be announced Thursday in Detroit at the North American International Auto Show.
Under the current regime, the EPA uses two tests, one for city driving and another for highway driving. Speeds are limited to 52 m.p.h. in the city test and 60 m.p.h. in the highway version. All take place at room temperatures, and the vehicle's air-conditioning is turned off -- conditions that critics have said fall far outside modern conditions on 70-m.p.h. freeways and gridlocked city streets.
In its testing, Consumer Reports found the city mileage was the more inaccurate of the two numbers, often wrong by 35% to 50%. Hybrids had the largest disparities, averaging 19 m.p.g. less than their EPA averages.
None of the three hybrids tested by the Free Press in 2004 approached the EPA's predicted fuel economy. All vehicles use more fuel in real-world conditions than in the EPA's controlled laboratory test. The hybrids fell short by a surprisingly wide margin -- nearly 20% in the case of the best-selling Toyota Prius -- in the 300-mile comparison test.
Further testing uncovered the fact that the hybrids' fuel economy also suffers when the vehicles' climate-control systems are set for maximum air-conditioning or to defrost the windshield.
After complaints in the 1980s that the tests were increasingly inaccurate, the EPA corrected the results by reducing the estimates by 10% for city testing and by 22% for highway estimates. The agency tests only about 10% of new models, relying on automakers to use the guidelines to test their own vehicles.
A spokesman for the Alliance of Automobile Manufacturers, who had not seen the proposal, said automakers "are generally supportive of EPA efforts to make fuel economy testing as accurate as possible to provide customers with the best information."
Posted by: Movie Guy at January 10, 2006 09:43 AM
James, regarding the comment above that correlation isn't causation, has anyone duplicated the oil-recession analysis with other industrial materials? I'm thinking of something relatively less important to the economy, such as tin or molybedum or kaolin. If their prices display the same pattern as oil, I'd be inclined to say that what we're picking in high oil prices is (sometimes) just the last binge of the boom, rather than a cause of recession.
Posted by: Bill Conerly at January 10, 2006 11:47 AM
Bill, there really isn't much indication of such behavior in other series of which I am aware. As a matter of fact, sensitive materials prices are often used as a procyclical leading indicator, whereas the behavior of oil prices is a countercyclical leading indicator.
Posted by: JDH at January 10, 2006 12:39 PM
Energy costs are beginning to bite Dow Chemicals. Hurricane may be the lead, but energy costs are included.
Posted by: Stormy at January 11, 2006 08:09 AM
I've been away on a raod trip. How's that for the reason to miss a gas & economy discussion.
FWIW, I think we're seeing what John and Suresh have described. People just charged their energy costs and kept on going. Consumer credit is easy, and debt is socially acceptable.
Driving down from California to Texas I had some funny experiences. I wondered how they'd react to my Prius. A couple guys came over and said it was the first they'd seen ... but they wanted one. They must be tired of filling up those pick-ups. There really are 90% pick-ups on some roads, but a half-dozen interactions with Texans were hybrid-friendly.
The second thing was that a couple radio stations in the panhandle and in New Mexico were doing sort of Christian financial management shows. "Get debt free." I remember one woman who called in
had a family income of $120K, a debt of $50K on cars, and a debt of $30K on credit cards. I'm afraid that is our economy in a nutshell.
Finally, FWIW, on driving a hybrid, even if you own one and think you have it figured out, it is kind of hocus-pocus what kind of road will get you good mileage and what won't. A slight grade will drop me from 50mpg to 40mpg. Cold weather (20-40F) seems to do the same. Some patterns of hills fill the battery and the use it efficiently, and some do not. But I ended up averaging out at 47 mpg for the whole 3000+ miles.
Posted by: odograph at January 12, 2006 05:46 PM
UPDATE: Proposed EPA revised mileage rules for vehicle window stickers
Fuel Economy (general info)
Proposed Rule and Test Methods for Calculating the Fuel Economy Estimates that are Posted on the Window Stickers of New Cars and Trucks
EPA Proposes New Test Methods for Fuel Economy Window Stickers
EPA420-F-06-009, January 2006
"The Proposed New Methods to Determine Fuel Economy"
"For the first time, the EPA fuel economy estimates will reflect vehicle-specific data from tests designed to replicate three real-world conditions that can significantly affect fuel economy: high speed/rapid acceleration driving, use of air conditioning, and cold temperature operation. Previously, these conditions were accounted for by across-the-board adjustments, rather than by vehicle-specific testing."
"EPA is also proposing that the fuel economy estimates reflect other conditions that affect fuel economy, such as road grade, wind, tire pressure, load, and the effects of different fuel properties. The fuel economy for each vehicle model would continue to be presented to consumers as city and highway MPG estimates."
"In the 2008 model year, the new methods would be used to determine the estimates. In 2011, a provision would take effect that would require manufacturers to perform additional cold temperature, air conditioning and/or high speed/rapid acceleration driving tests for some vehicles that may be more sensitive to these conditions."
"How Fuel Economy Estimates Will Change from Today's Labels"
"Under EPA’s proposal, the new fuel economy estimates would be lower for most vehicles. This is not because auto makers have designed the same vehicles to be less fuel efficient—it is because our new test methods take into account factors that have been missing or not fully accounted for in the current tests. Because some vehicles are more sensitive to these factors than others, the impact of the proposed changes will vary from vehicle to vehicle. The city MPG estimates for conventional (non-hybrid) vehicles would drop on average by about 10-20 percent from today's labels, while the highway estimates would drop by about 5-15 percent, depending on the vehicle."
"For hybrid vehicles, the city MPG estimates would drop 20-30 percent from today's labels. For highway MPG estimates, the change is about the same as for conventional vehicles. The nature of current hybrid technology—the addition of a battery as a second source of on-board power, sophisticated control systems, and sometimes a smaller engine—makes a hybrid’s fuel economy more sensitive to certain factors, such as colder weather and air conditioning use. However, many hybrid models will remain among the most fuel-efficient vehicles on the market."
PURCHASER BOTTOM LINE:
Depending on the manufacturer, one can expect that vehicle model EPA fuel economy sticker label changes in 2008 will result in:
City MPG - 10-20 percent decrease possible.
Hwy MPG - 5-15 percent decrease possible.
Hybrid City - 20-30 percent decrease anticipated.
Hybrid Hwy - 5-15 percent decrease anticipated.
Posted by: Movie Guy at January 13, 2006 06:08 PM
First of all, I think these new methods should be used in CAFE calculations. We can't keep kidding ourselves.
Secondly, I hope these changes will make all EPA numbers more "real world" but worry a bit about the lobbying that surely must now be going on. Every manufacturer must be suggesting "fair" methods that are adventageous for their cars.
Finally, is a simulation of true traffic jam stop-and-go absent? For people with that "real world" environment, hybrids are going to shine. I've certainly sat through a 20 minute traffic jam without using my gasoline engine at all, just creeping forward on electric.
Posted by: odograph at January 14, 2006 07:01 AM