Fall in Gas Prices + Less Driving = $315B Savings

The Federal Highway Administration reported today that travel during September 2008 on all roads and streets fell by -4.2% compared to September last year. This drop follows the 5.6% August decline, which was the largest ever year-to-year decline recorded in a single month. Further, September marks the eleventh consecutive month of traffic volume decline compared to the same month in the previous year. Travel YTD through September 2008 fell by -3.5% compared to 2007.

The eleven consecutive monthly declines (November 2007 through September 2008) in miles driven compared to the same month in the previous year is close to a record, and represents one of the most significant adjustments to driving behavior in recent history.

On a moving 12-month total basis, traffic volume in September fell to 2,917 billion miles, the lowest level in almost five years - since February of 2004 (see chart above), and this measure of traffic volume has fallen in each of the last 8 months.

Bottom Line: The moving 12-month total traffic volume in September 2008 (2,917.2 billion) is below the September 2007 level (3,006.4 billion) by 89.2 billion annual miles driven. At an average fuel efficiency of 20 m.p.g., and an average gas price of $3.42 per gallon over that period (data here), that reduction in miles driven represents an annual savings of more than $15 billion for American consumers and businesses.

That's in addition to the much larger $300 billion expected annual savings for consumers from the drop in gas prices from $4.12 per gallon to $2.00 since July (gas price data here), since American consumers and businesses save about $1.42 billion annually for every penny decrease in gas prices (see calculation here).

Thanks to John Thacker for the FHA update.