Pump prices are down and given the outlook of a weak global economy, a strong dollar and a lingering oil glut, they could drop even more as the year goes on. The U.S. average retail gasoline price fell below $2.00 per gallon in January and as of last week it averaged $1.93 per gallon. For over a year now, it's been significantly lower than the roughly $3.50 per gallon average of the previous few years, let alone the brief spike to over $4.00 per gallon in summer 2008.
Consumers respond to gasoline prices and so it's no surprise that new vehicle sales are at a record high while the vehicle mix has shifted away from compact segments and back to trucks, larger SUVs and more luxurious cars. The amount of driving is back up as well.
The fuel economy of the vehicle fleet doesn't totally backslide even when the price of fuel does. Most efficiency gains are due to improved technology; once such engineering refinements are made they don't get undone. Corporate Average Fuel Economy (CAFE) standards prop fuel economy up even when consumer interest fades, and that policy is now reinforced with greenhouse gas (GHG) emissions standards that limit the amount of carbon dioxide (CO2) and other GHGs exhausted from tailpipes.
Average new car and light truck fuel economy (right-hand axis)
compared to nominal and inflation-adjusted gasoline prices.