Publications: Notes at the Margin

The Cares Act, Retirements, Vehicle Miles Traveled, and Fuel Use;

Accelerating Oil’s End with Aggressive Regulations (July 26, 2021)

 

We discuss two topics in this report. The first relates to the impact of the CARES Act, the new childcare allowances, and fuel use. The second focuses on the efficacy of various types of past energy regulations and implications for the future.

 

The impact of Covid-19, the CARES Act, and the new childcare allowances introduced by the Biden administration has been widely debated. Conservatives assert that the additional unemployment benefits offered by the CARES Act have allowed many who were laid off to stay on unemployment rather than return to work. Other research suggests the labor force permanently shrank during the pandemic. In any event, civilian employment was down almost four percent in May from May 2019. As it happens, vehicle miles traveled (VMT) were also down by four percent. Many labor experts believe employment will lag 2019 levels for years, especially with the newly enhanced childcare benefits. If they are correct, gasoline use will also trail use in previous years.

 

Those who see gasoline demand returning to 2019 levels in late 2021 or 2022 may be wrong because they are not paying attention to economic developments.

 

The second portion of this report looks at various energy measures adopted in the 1970s. Some, like the fuel economy standards, failed to reduce petroleum product use. Others, such as ordering electric utilities to switch to coal, were effective in reducing oil consumption. The latter measure, though, tragically boosted US carbon dioxide emissions by the equivalent of five years of our total emissions in 2020.

 

The experience of efforts to curb US oil demand in the 1970s is helpful in anticipating the impact of new and forthcoming regulations to limit fossil fuel use between 2021 and 2050. We suggest, for example, that rules banning the sales of internal combustion engine (ICE) vehicles will be very effective. Like it or not, consumers will be driving electric vehicles (EVs), and oil producers will be selling much less oil.

 

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