By June 10, 2016 Read More →

Opinion: Record British traffic is boosting fuel consumption

Record British traffic has more than offset improvements in vehicle efficiency

British traffic

British traffic has increased recently, and is growing at the fastest rate for more than a decade thanks to economic growth and lower fuel prices.

By John Kemp

LONDON, June 10 (Reuters) – Britain’s consumption of road fuel is growing at the fastest rate for more than a decade as the impact of economic growth and lower prices more than offsets improvements in vehicle efficiency.

Britain’s motorists consumed 36.0 million tonnes of motor spirit (gasoline) and road diesel in the 12 months ending in March, up from 35.2 million tonnes in the prior 12-month period.

Fuel consumption has been rising since 2013/14 and the increase predates the collapse in oil prices from mid-2014.

For the most part, the rise in fuel consumption reflects a growing economy, increasing employment and rising household incomes.

Fuel is taxed much more heavily in Britain than in the United States and emerging markets, so the drop in oil prices has had a much more modest on pump prices.

Nonetheless, lower fuel costs have improved driving affordability and are probably contributing to the strong growth in both traffic volumes and fuel sales.

Pump prices declined by about 25 percent for both gasoline and diesel between mid-2013 and the first quarter of 2016 (“Typical retail prices of petroleum products”, UK Department for Energy and Climate Change, May 2016).

The volume of traffic on the country’s roads has been rising almost 2 percent per year since the middle of 2013 (“Provisional road traffic estimates, Great Britain”, UK Department for Transport, May 2016).

And the number of registered vehicles is now growing well over 2 percent per year, the fastest rate since 2005 (“Vehicles statistics”, UK Department for Transport, June 2016).

Traffic volumes and vehicle registrations increased slowly in the middle years of the last decade as sharply rising fuel prices curbed driving, then fell sharply during the financial crisis and its aftermath.

But as the economic expansion has become more mature and fuel prices have fallen steeply, so traffic, registrations and fuel consumption have all returned to rapid growth.


Until a couple of years ago, it was fashionable to claim that fuel consumption had peaked in the United Kingdom and the other advanced industrial economies.

Improvements in vehicle efficiency and changed behaviour among the millennial generation (particularly the preference for urban living and using public transport) were cited as reasons why fuel demand was peaking.

In practice, the peak in fuel consumption has proved temporary, and seems to have had more to do with the rising cost of fuel and the lingering effects of the deepest recession since the 1920s.

Total road fuel consumption is still about 7 percent below the peak of more than 38 million tonnes set in 2007 but the trend is now firmly upwards once again.

With the impact of the recession unwinding and fuel prices down by a quarter from their earlier peak, fuel demand has resumed fairly strong growth.

Britain accounts for just 1.6 million barrels per day of oil consumption, 1.6 percent of the global total, which puts it in 15th place among oil-consuming nations (“BP Statistical Review of World Energy”, June 2016).

But the same resurgence in motorists’ fuel consumption is evident in the United States and some of the other advanced economies, at least those which are recording economic growth.

Total oil consumption in the OECD economies increased by more than 500,000 barrels per day in 2015, the first significant increase since 2005 (excepting the post-recession bounce in 2010).

Consumption seems set to show a large gain in 2016 and again in 2017, assuming no recession and fuel prices do not rise too much, which would mark the strongest and most sustained growth since 2003-2005.

Coupled with the phenomenally rapid growth in some large emerging markets, including China, India and Mexico, increasing consumption in the advanced economies is playing a critical role rebalancing the oil market.

John Kemp is a Reuters market analyst. The views expressed are his own.

(Editing by David Evans)

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