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Millennials Grab the Wheel and Step on the Gas

New evidence shows millennials are not so different after all.

Starting around 2012 there was a lot of discussion about millennials being different.  Why Don’t Young Americans Buy Cars?asked Jordan Weissman in the Atlantic. Why Aren’t Younger Americans Driving Anymore? wrote Brad Plumer in the Washington Post.

At the time, it made sense to ask these questions. Back in 2012, U.S. gasoline sales had declined for five years in a row and were at their lowest level in more than a decade. New vehicles sales had still not recovered from a sharp decline in 2009, and automakers were anxious. Analysts were looking around for an explanation for what appeared to be a “generational” shift in gasoline consumption and car buying, and the millennial story seemed like a good match.

The story also felt entirely plausible. Born in the 1980s and 1990s, millennials have grown up in the digital age, so it makes sense that they could have unique tastes and preferences. For many of us, the stereotypical millennial lives in an urban area, likes to bike, and uses public transit. Could it be that this generation has a fundamentally different relationship with driving? And, if so, might a generational shift go a long way toward reducing the harms caused by driving, like pollution and traffic congestion?

The Present Looks a lot Like the Past

Could be, but probably isn’t. Fast forward to 2019. U.S. gasoline consumption has increased steadily now for seven years in a row. What looked in 2012 like a generational shift now looks more like a temporary blip.

gascon
Source: Constructed by Lucas Davis (UC Berkeley) using EIA data `Motor Gasoline, 4-Week Averages.’

Americans are driving more than ever. Yes, even millennials. As their employment and income prospects have improved, millennials are buying cars and driving just like previous generations. It is becoming increasingly clear that economic factors — not changing tastes – are what explains the recent pattern for gasoline consumption.

To be fair, many of the same media outlets which initially touted the millennial story have been quick to note the reversal. “Millennials: Not So Cheap, After All,” writes Derek Thompson in the Atlantic. “Why Driving in the U.S. is Making a Big Comeback”, writes Brad Plumer in Vox.  Cheap gasoline since 2014 and an expanding economy and, what do you know, this new generation is jumping into car ownership and driving just like previous generations.

But, it is not enough to squint at the aggregate data. Two recent studies use detailed household-level microdata to much more carefully test the millennial theory.

Buying Cars

Economists Christopher Kurz, Geng Li, and Daniel Vine have a paper called “Are Millennials Different?” that examines a range of consumption behavior by millennials, including driving.

Many millennials entered their working-age years during the great recession, so they have lower earnings and fewer assets than previous generations at the same age. However, when you control for these economic factors, Kurz and coauthors find no differences in consumption preferences for millennials compared to previous generations.

The authors specifically examine vehicle purchases. New vehicle purchases by young households dropped during the great recession, but the shortfall was not particularly large and the rate has now returned to the same range as previous generations. Overall, when viewed from a life-cycle perspective, average spending by millennials on both new and used vehicles is right in line with previous generations.

So yes, millennials are buying cars.

newcars
Note: Turns out millennials like buying cars. Max Pixel. https://www.maxpixel.net/Park-Car-Industry-New-Cars-Autos-Pkw-Autotransport-3631086

And Driving, Too

Ok, so millennials are buying new cars, but are they driving them as much as previous generations? Economists Benjamin Leard, Josh Linn, and Clayton Munnings examine this question in a recently published paper “Explaining the Evolution of Passenger Vehicle Miles Traveled in the United States”.

Total U.S. national vehicle miles traveled (VMT) follows a pattern similar to the pattern for total U.S. gasoline consumption. VMT increased steadily during the 1990s and early 2000s – then plateaued in the mid-2000s – then increased again starting in 2012.

Leard and coauthors use household-level microdata from before the slowdown to estimate the relationship between VMT and economic characteristics. They then use the model to predict VMT since the great recession, and to test whether the recent pattern is explained by economic factors or generational tastes.  Bottom line. Economic factors – not generational tastes — explain most of the variation in VMT.

So yes, millennials like to drive.

openroad
Note: Millennials like the open road.  Pixabay. https://pixabay.com/photos/gil-road-highway-nature-landscape-2854284/

Don’t Wait for the Millennials to Change the World

I take all this as striking validation that economic factors matter. For U.S. millennials, like prior generations, it is becoming increasingly clear that income and other economic factors matter much more than generational tastes.

This has implications for policy. Climate change, traffic congestion, and other externalities from driving are extremely costly to society, but we cannot wait for some future altruistic generation to come along and solve the problem for us. Our children are not going to suddenly arrive out-of-the-blue and act completely differently than we did and solve the world’s energy and transportation problems. The evidence shows that if we want to change behavior, we need to change the economics of driving.

Keep up with Energy Institute blogs, research, and events on Twitter @energyathaas.

Suggested citation: Davis, Lucas. “Millennials Grab the Wheel and Step on the Gas.” Energy Institute Blog, UC Berkeley, February 25, 2019, https://energyathaas.wordpress.com/2019/02/25/millennials-grab-the-wheel-and-step-on-the-gas/

 

 

Lucas Davis View All

Lucas Davis is the Jeffrey A. Jacobs Distinguished Professor in Business and Technology at the Haas School of Business at the University of California, Berkeley. He is Faculty Director of the Energy Institute at Haas, a coeditor at the American Economic Journal: Economic Policy, and a Faculty Research Fellow at the National Bureau of Economic Research. He received a BA from Amherst College and a PhD in Economics from the University of Wisconsin. Prior to joining Haas in 2009, he was an assistant professor of Economics at the University of Michigan. His research focuses on energy and environmental markets, and in particular, on electricity and natural gas regulation, pricing in competitive and non-competitive markets, and the economic and business impacts of environmental policy.

10 thoughts on “Millennials Grab the Wheel and Step on the Gas Leave a comment

  1. I can’t decide which is more embarrassing. This article, which both incorrectly claims US gasoline consumption has risen for 7 straight years, or, a similarly incompetent piece in which the same author claimed “US gasoline consumption is higher than ever” written in 2016! and based on *one month’s data.*

    No energy professional and certainly not an academic would use a single month’s commodity consumption to make a broad claim about trends. There are single month outliers in every data set, for every conceivable series under the sun. So, this is very silly: https://energyathaas.wordpress.com/2016/09/26/addicted-to-oil-u-s-gasoline-consumption-is-higher-than-ever/

    US gasoline consumption peaked in 2006, at 17,511 trillion btu. Yes, it rose from much lower levels plumbed in the great recession, and managed to put together a *4 year recovery*, from 2012 to 2016. Gasoline consumption then started to decline (not by much) in 2017, and again last year, 2018. Here’s the data: https://www.eia.gov/totalenergy/data/monthly/pdf/sec3_19.pdf

    The rest of the article is a mash of broad, unsupported claims that sound convincing when asserted, but don’t hold up under scrutiny. But given the author’s propensity to fudge and mislead, or be outright incorrect on data, what should one expect.

  2. The volatility of the 4 week averages have changed dramatically according to the chart. What’s the explanation for that? Also, at least according to the travel surveys of a decade ago, commuting accounted for only about a third of the VMT. It would be interesting to see how the changes in places of residence have affected the VMT. A longer commute is dictated by housing prices as much as gasoline and vehicle costs.

  3. Living in the Silicon Valley bubble creates a wrong impression of change. Only in urban places and high density and convenient alternative transportation might one expect change. Working remotely is feasible for some, but most still need to ‘go to work’. Large companies provide transportation from residential hubs to work, but by and large workers need to figure out themselves. Delivery and Ride hailing services, UPS, Lyft etc, have put more cars on the road.
    The only solution to driving more is bringing work and residential locations within walking distances. Or holographic – teleportation means of virtual travel.

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