01 March 2012

Follow Up: UK Fuel Transport Intensity

This post follows up a discussion earlier this week which introduced the notion of the gasoline (expenditure) intensity of the economy. A reader (Thanks RC!) observed that the UK has seen a dramatic shift away from gasoline to diesel fuel for transport. So I have recalculated the index (shown above) to include both gasoline and diesel (data sources are the same).

With respect to the costs of fuel transport (not just gasoline) I would then revise the preliminary conclusions from the earlier post as follows:
  • The UK spends about 300% more than the US on fuel transport as a proportion of GDP (in round numbers, the US is at about 0.3% and the UK 1.4%, for the 2010 data)
  • Assuming UK petrol consumption is constant in 2011 and 2012, and GDP in 2012 = 2011, then the index above increases to 120 in 2011, or about the same as it was in 2000.
  • Thus, since 2001 US spending on gasoline as a proportion of GDP has increase by about 30%, while UK spending is about the same level or a little less.
So the bottom line for the US in comparison to the UK is mixed -- The US spends about 20% as much of GDP on gasoline than does the UK.  At the same time, over the past decade US gasoline intensity has increased by about 30% while UK gasoline intensity is about the same as it was 10 years ago.

I am also following up on trying to get global data on energy and petroleum intensity of GDP, as discussed here (thanks to those who have emailed, but no hard data yet!).

18 comments:

  1. Roger, I'm slightly grappling with this. A current litre of diesel at 138p ($8.35 per US gallon) consists of 58p fuel tax and 23p VAT, total 81p, c. 60%. (VAT is charged on the fuel tax as well as the product price.)

    The tax burden as a % has fallen - it was in the 70%'s in the second half of the 1990's - as the product price has risen sharply and the tax has a fixed element per litre.

    If the UK government was indifferent between taxing road fuel and something else, and cut 30p off the total tax on fuel and added the equivalent to property (say), that would shift gasoline intensity by over 20% (not allowing for any demand change).

    The UK spends c. 4.5x as much of GDP on RTF as the US, equalising prices ($8.35 vs $3.20 in Boulder?) would take that down to 1.7x as much (and presumably some price elasticity would take that back to 2x or more).

    What conclusions do you draw from this other than the obvious inference that RTF has a very low price elasticity? Why might we consume so much more per unit of gdp?

    I note from Buffett's 2011 letter 'Measured by ton-miles, rail moves 42% of America’s inter-city freight' and from Wikipedia 'rail freight occupies an 11.5% market share for surface freight transport in the UK' (measured by ton-miles also).

    What conclusions are you thinking of?

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  2. -1-Roddy

    My initial reaction is that the trend in RTF intensity of GDP is more important than the absolute level. That said, I would hypothesize that the absolute level bears some relationship to the magnitude and direction of the trend.

    As a tentative starting point I would argue that the RTF expenditure should be at the lowest absolute level consistent with a sustainable downward trend. That should make environmentalists and capitalists both happy ;-)

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  3. don't forget that oil is priced in u.s. dollars, so you'll want to adjust for any changes in the value of the pound over time...

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  4. -3-Marlowe Johnson

    Thanks, all calculations here are in UK pounds, so fluctuations in oil price and currency are part of the results.

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  5. Roddy,

    If you strip out the taxes and adjust for currency fluctuations and inflation, you'll find that the UK consumes far less than the U.S. as a proportion of GDP. This of course is hardly surprising; it has a much more efficient fleet and compact urban form. I find it increasingly odd that Roger thinks that his current approach is useful.

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  6. but roger oil on the international market is priced in u.s. dollars, not pounds! Consequently, any change in the value of the pound relative to the U.S. dollar will impact your fuel$$/GDP ratio for the U.K. but not for the U.S.

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  7. -6-Marlowe Johnson

    Thanks ... but, so what?

    See also previous discussion on this blog about manufacturing, Canada vs. US, currency fluctuations are part of the context.

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  8. Roddy,

    A couple of points on the freight issue you raise. The Buffet quote refers to inter-city freight. The Wiki entry presumably is referring to all surface freight, which includes inter- and intra-city freight movement. Hope that helps clarify the discrepancy.

    Second, the growth in on-road freight relative to other modes is largely attributable to the shift to 'just-in-time' delivery practices which is more amenable to on-road haulers than fixed rail. While I haven't looked at the numbers, I suspect that the shift over time has been more pronounced in North America than it has in the UK, since rail infrastructure is less significant (and convenient) on this side of the pond.

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  9. On cue, Dorgan and Lott on oil intensity of the economy:

    "our ability to protect the economy from oil price shocks is determined primarily by the amount of oil we use compared to the size of our economy; that is, by the oil intensity of the U.S. economy.

    Here again, we have been making steady progress. In 1975, America’s oil intensity was 1.2 barrels of oil for every $1000 of GDP; in 2010, we only used half a barrel of oil for the same amount of GDP (all figures in adjusted 2005 dollars).

    This oil intensity metric will continue to improve as fuel economy and other efficiency measures increase, but efficiency alone may not keep pace with oil price increases. Happily, efficiency is not the only option. Going forward, the best way to cut the oil intensity of our economy will be to create viable alternatives to oil.

    Here, America has not done as well. Oil still fuels 93% of our transportation sector needs. The 2007 federal energy bill did include aggressive production requirements for ethanol, and this production has helped cut our oil intensity. The next step is to achieve additional production from advanced (cellulosic) ethanol to meet our current target of 36 billion gallons of ethanol by 2022.

    Many other oil substitutes are available if we will invest in them. Using newly abundant natural gas and propane, especially for trucks and buses, have the potential to reduce total U.S. petroleum use. Switching to more electric vehicles, which automakers are beginning to bring to market, and developing the needed infrastructure and electric grid transmission, likewise could significantly cut our oil use over time. Other alternative fuels including biofuels from algae could be transformative. In the long run, oil alternatives will be a key reducing our vulnerability to price shocks.

    America cannot control the price of oil. But we can control our own energy destiny. An aggressive national energy policy that includes investments in domestic oil production, improving efficiency and creating more oil substitutes can insulate our economy and our people from the worst of coming oil price shocks."

    http://thehill.com/blogs/congress-blog/energy-a-environment/213687-bringing-oil-intensity-to-the-energy-debate

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  10. Marlowe - thanks re rail, I spotted the inter-city but have no clue what the US ton-mileage of intra-city is as a proportion of the whole, I would guess very small, simply because of US mileage? So I was ok leaving it out. Instinctively I'd have thought the US, because of geography, would shift a higher proportion of goods by rail, and stuff like coal which we don't have and is heavy would slant the stats to rail. Our UK default is truck for everything afaik.

    If I remove all UK tax (60%) and use a plug number for US of 50c (Wikipedia), so c. 15%, the UK/US ratio would fall from 4.5x (RPJr's number) to 4.5 x 40% x 1.15 - over 2x. So I'm not sure how you say that the UK consumes less (/GDP)?

    I don't know if that finding is surprising or interesting or not. I tend to agree with you - that the UK, with its fuel taxes, compact form, more efficient road vehicles, should consume over twice the US as % of GDP after backing out taxes is perhaps odd. Which is why I threw in rail as a possible reason.

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  11. Roddy, Marlowe on rail my memory served up this:

    http://www.economist.com/node/16636101

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  12. Roger, re Dorgan and Lott. I went to an energy conference the other day and chatted with the EU Policy Officer i/c new energy technologies, including shale gas.

    We spoke about gas (LNG etc) for transport - he said total bust. It's been tried all over Europe with subsidies at various times, never taken off. With an ever-widening price differential it might have a better chance I guess. But it's not on the European agenda.

    I shall snip my own opinions on cellulosic, let alone algae-based, ethanol.

    But overall I'd say that 'Many other oil substitutes are available ....' is a tad optimistic.

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  13. -12-Roddy

    I hear a bit more optimism about gas for transport, particularly long-haul freight. In the US the is a great need to figure out what to do with all the damn gas piling up, so I wouldn't be surprised to see some movement on this in the context of large fleets and trucking.

    That said, the question is the right one, how to reduce the RTF intensity of GDP. Thx.

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  14. Roger, thanks. Good article. Fits perfectly with my preconceptions. And lends credence to my stab that rail might have something to do with the gap? I assume whatever fuels US rail doesn't show up in your gasoline stats?

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  15. -14-Roddy

    Rail is diesel and does not figure into my US stats, but is <~3% of auto consumption by volume, so can't be a big factor. See:

    http://www.bts.gov/publications/national_transportation_statistics/html/table_04_05.html

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  16. Roger you might find the following report interesting if you haven't come across it already. see in particular the graph on page 50 .

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  17. #16 Marlowe

    I think that was the main issue that was mentioned by several comments in the original post of this series. I get the impression that Professor Pielke has not yet addressed that issue.

    While improved energy intensity is a worthy goal, upon whom will the costs encountered while getting there be a larger burden. It's another one of those big-time average effects: spread over the entire population and compared with the entire economy hides the fact that half the population is below the average income level. Many are significantly below and struggle every day simply trying to provide basic needs for life. And for many transportation is vital to getting to work to make the money to pay for those basic needs.

    It is a so far unverified assumption that a massive-scale reduced-carbon economy is attainable.

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  18. Marlowe #16 - thank you, I recall the report, will have a good read. Looks realistic from reading a few pages, as in:

    4.5.6. Overall, it seems likely that the renewables policy will offer only a very weak buffering against fossil fuel prices, and that even if these rise to very high levels the UK would be exposed to the costs of the environmental policies in addition to, not instead of, rising fossil prices.

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