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Is there a relation between fuel consumption and taxes?

Is there a relation between fuel consumption and taxes?

 Grégory Launay - Last update: February 6th, 2013


Intuitively we might be tempted to answer this question with a clear and non net! The car we need to go to work, run errands, take the kids to school ... and that whatever the price at the pump. For most purposes we do not have much choice. Increase the price of gasoline at the pump would not help much ...

Behind this intuitive response, related to our daily lives, trying to study this question in a slightly broader.



What differences in consumption?


We must first admit that consumption differences exist. A similar level of development (for OECD countries, for example) there is very significant differences in the level of energy consumption, transport demand ... and therefore CO2 emissions.

Average consumption of cars (PC + LCV) for different countries from 1970 to 2000 - Source: International Energy Agency, 2004


One sees here, for example the average fleets in different countries. It is observed that the USA, Canada and Australia are always clearly distinguished with average fuel consumption much higher than Europe for example.

Population density and energy consumption of major Western countries - Source: IEA 2008


This graph, which shows the annual energy consumption per capita, still allows to distinguish the United States, Canada and Australia. Beyond this is the car all the energy that is much higher than in Europe and Japan.


This graph also shows that these three countries are those whose population density is lower. A lower density means more transport, more likely to travel by air as well as housing the largest (and therefore most energy ...). It does not seem so stupid to observe a correlation between energy consumption and population density.


CO2 emissions per capita and per year for different cities of comparable size - Source Jeff Kenworthy, 2003


Another illustration of this correlation. One can hardly say that the city of Barcelona is underdeveloped compared to Atlanta. And yet a resident of Barcelona emits ten times less CO2 to move a resident of Atlanta.





The role of Tax?


But then if the least dense have travel needs larger comméraient why their cars anymore? One would expect the opposite right? In France, a large roller will tend to prefer a car that consumes less. We made notes that the average vehicle is also highly correlated to the price of gasoline at the pump.

Fuel Price vs consumption fleet average in 1998 - Source: International Energy Agency, 2004


It seems that the United States, Canada and Australia, including low population density has imposed a significant energy demand and initially did not have too many problems of supply (the United States is began to import oil in the 70s, not before), have not seen fit to tax heavily the fuel pump. And it is this low level of tax that has conditioned the poor performance of their vehicles.


Oil production in the United States - Source: UK Energy Research Center, August 2009


The importance of price is still more meaningful if one takes into account the distance traveled. The following graph shows the total gasoline consumption per person per year to travel by car.


Devoted to automobile fuel per person per year in 1998 - Source: International Energy Agency, 2004


Beyond the intuitive feeling that one can have, it seems that although different fees for long periods have a significant impact on oil consumption. This figure seems quite telling!


The taxes have had an effect during the crisis?


Observe the decline in sales of passenger cars during the 2008 crisis.


Evolution Markets cars during the crisis - Summary of the author on various sources (including CCFA)


We see that there is no clear link between the decline in sales and the price of oil to the pump. While the United States has suffered greatly (-10%) but countries in Europe have done worse. Market in Britain has fallen by nearly 12% and Spain 28%!


Price of gasoline at the pump has high priori therefore not protected European markets lower sales brutal. The reaction of governments (through scrappage particular) seems he had an important role in these results.


However, from the point of view of manufacturers, it seems that this difference sustainable prices (and therefore energy performance of vehicles available) is not neutral.


Change Sales 2007-2008 major global automakers - Sources CCFA, 2009

If the U.S. market is not necessarily the one who suffered most can not be said of these manufacturers. These they who were the main "victims" of this crisis. Tax, often decried here seems to have had a beneficial role!