Spotlight On Economics: On The Road Again

By David Ripplinger

Bioproducts and Bioenergy Economist and Assistant Professor NDSU Department of Agribusiness and Applied Economics

Automobiles have a special place in the American experience. Cars are a symbol of ingenuity, pride, prosperity and, perhaps most of all, freedom.

After World War II, Americans began driving in force. Vehicle miles traveled increased consistently at a rate of 3 percent every year. There were a few plateaus and small dips from the trend because of an occasional recession, energy crisis or war. However, America had places to go and it was going there in an automobile.

Everything changed in the summer of 2008, when gas prices soared to more than $4 per gallon. The situation wasn’t helped by the financial crisis that came to a head in the fall of that year. Vehicle miles traveled fell dramatically, more than they ever had before.

When the economy did recover, vehicle miles traveled did not. Many theories were made about the end of America’s car culture, including technology, changing social behavior, lazy teenagers and transit.

But it is now clear that news of the car’s demise was greatly exaggerated. Vehicle miles traveled have rebounded, returning to an annual growth rate of 3 percent during the last two years, the same rate that prevailed prior to 2008.

The growth in vehicle miles traveled is important news for American farmers.

In the last 10 years, ethanol has secured its place in the domestic gasoline blend. Motivated by federal policy, ethanol is now the fuel used to boost gasoline’s octane due to its low cost, greenness and availability. At almost every fuel pump in the nation, regular gasoline contains 10 percent ethanol.

Despite improved fuel economy and the work of Elon Musk, the Canadian-American business magnate, engineer and inventor, most cars and trucks still use quite a bit of gasoline, with ethanol blended in, to move. Nearly all ethanol used in the U.S. is produced with domestically grown corn.

Last year, 14.8 billion gallons of ethanol were produced in the U.S., using about 95 percent of capacity.

If Americans continue to travel and fuel efficiency doesn’t increase dramatically or alternative fuels don’t come online, more ethanol likely will be needed. The ethanol produced here or abroad will mean good news for the communities where bio-refineries are built.

While I’m not sure what the future holds, at least for the time being, America is back on the road.

Source:ndsu.edu