As Americans drive less, highway revenue is drying up

Americans are driving less, the US Department of Transportation said Wednesday, continuing a six-month trend. Overall vehicle miles on all public roads fell 1.8% year-over-year in April, and year-to-date mileage is down 2.1% compared with 2007.

The drop in mileage was spread across all regions except the Northeast, where miles driven actually rose 1.4%.

None of this should come as a shock. There has been plenty written about the drop in gasoline demand due to the soaring prices at the pump.

But the DOT also noted that the drop in miles driven would have a negative impact on highway revenue, which comes in the the form of a 18.4 ctstgal tax on gasoline sales, and a 24.4 cts/gal tax on diesel.

Based on the latest monthly figures from the Energy Information Administration, US finished gasoline supplied in March dropped 100,000 b/d year-over-year, or 130,200,000 gallons total. At 18.4 cents/gal, that would have resulted in a revenue drop for the Highway fund of nearly $24 million. On the other hand, low and ultra-low sulfur diesel supplied rose 32,000 b/d, resulting in approximately $10.2 million increase in revenue.

Needless to say, the DOT is not happy about it. "We're burning less fuel as energy costs change driving patterns, steer people toward more fuel efficient vehicles and encourage more to use transit. Which is exactly why we need a more effective funding source than the gas tax," US Transportation Secretary Mary E. Peters said in a press release.

The Secretary noted that data show midsize SUV sales were down last month 38 percent over May of last year; car sales, which had accounted for less than half of the industry volume in 2007, rose to 57 percent in May. She said past trends have shown Americans will continue to drive despite high gas prices, but will drive more fuel efficient vehicles consuming less fuel. "History shows that we're going to continue to see congested roads while gas tax revenues decline even further," she said.

The argument for a change in funding for highways away from the gasoline and diesel tax kind of breaks down, unless the DOT was complaining about the funding scheme when gasoline demand was going through the roof a couple years ago. We don't recall hearing a peep.

But if the argument is that miles driven will remain the same or increase (which according to DOT statistics they haven't yet done) because more fuel-efficient vehicles will allow drivers to save money, then what is the solution? Perhaps an increase in toll roads, so drivers can directly pay for the upkeep of the roads they drive on.