Introduction

Has traffic congestion in the U.S. significantly changed with this year’s gas price increases? How have consumers changed their driving behaviors based upon the increase in gas prices? What impact on traffic and consumer behavior can we expect as gas prices fall or rise?

These are the questions INRIX answers in The Impact of Fuel Prices on Consumer Behavior and Traffic Congestion, an INRIX National Traffic Scorecard Special Report.

In June, 2008, INRIX published the INRIX National Traffic Scorecard. The 120-page report was the first of its kind to rank and provide detailed information on the 100 most congested U.S. metropolitan areas and the 100 worst traffic bottlenecks, all based upon calendar year 2007 traffic information. The reaction to the scorecard from consumers, government agencies and businesses was amazing. INRIX gained national attention with scorecard results featured on the Today Show, 140 TV stations, over 500 radio stations and dozens of local newspapers. Publication of the scorecard also inspired and contributed to many blogs and discussions about the state of traffic and potential solutions in cities across the country.

Following the major spike in gas prices from an average of $3.08 at the beginning of 2008 to $4.02 on June 30th, INRIX decided to analyze the impact of high gas prices on traffic across the nation. INRIX research included:

• Leveraging its traffic data archive for the first half of 2008, analyzing congestion for the same regions and roadways the company analyzed in 2007 for its original scorecard
• Partnering with OPIS, the leading publisher of oil price information, to correlate traffic congestion levels with fuel prices at a national and metropolitan level
• Engaging Harris Interactive, an independent research firm, to conduct an online consumer poll and gain additional insights into changes in consumer behavior

In the middle of INRIX’s analysis in the third quarter, the overall U.S. economic picture radically changed and gas prices began to fall. This Special Report takes these changes into account and provides unique insights into how consumer behavior and traffic are expected to evolve in the coming year.

Summary of Key Findings

Correlations of Gas Prices and Consumer Behavior on Traffic Congestion

Increases in gas prices in the first half of 2008 significantly impacted consumer behavior, resulting in strong correlations with reduced traffic congestion on a nationwide basis. The U.S. population appears to have made lasting changes to their behavior, particularly decreasing discretionary driving by combining trips, taking fewer trips, using commuting alternatives to driving, and reducing the frequency of vacations by car. We expect this consumer behavior to persist at some level even if gas prices continue their recent decline and revert to pre-2007 levels. Key findings include:

• The average gas price increase of 28% in the first half of 2008 significantly influenced a 3% reduction in Travel Time Index (a common measure of traffic congestion) for the nation as a whole this year, slightly below 2006 levels
• Ninety-six of the nation’s top 100 markets (by population) had drops in traffic congestion levels in the first half of 2008 compared to 2007
  
  
  
  
  
  
  
  
• While consumers react to the high costs of fuel by decreasing all driving, the most significant impact to consumers is the reduction of discretionary driving
• A whopping two-thirds of consumers indicated that increased gas prices caused them to decrease the amount of driving they do, including 23% reporting a significant decrease
  

  Two-thirds of consumers decreased their driving
  based upon increased gas prices (Harris Interactive Survey)
• 72% of those who reported a decrease of driving said they combined several trips into one to conserve fuel and 69% indicated they took fewer trips as a result of increased gas prices
  

  Consumers have combined trips and taken fewer trips to conserve fuel (Harris Interactive Survey)
• If gasoline prices rise (again) to $4.50/gallon, more than half (54%) of all automobile owners said that they would find it worthwhile to reduce their frequency or distance of vacations by car
• Females (69%) were significantly more likely than males (63%) to report a decrease in driving as a result of higher gas prices
  

  The largest U.S. cities do not all respond the same to changing gas prices.
  In fact, only 3 of the top 10 (Los Angeles, Miami, and Atlanta)
  show a strong correlation (0.8-1.0) between gas price and travel times
  
  
• INRIX data analysis validates that consumers acted as they stated they would act with the fuel price increases in the first half of 2008
• The reduction in discretionary driving by consumers (we expect similar reductions from commercial fleets and businesses) is having a dramatic impact in reducing travel times nationwide
• Many cities exhibiting high correlation in congestion reduction from the fuel price increase are types of areas that are most impacted by vacation or leisure travel (i.e., driving destination sites) such as Las Vegas, Miami, Daytona Beach, and Orlando
• The largest decrease in congestion is at those times that are most impacted by vacation driving, specifically Friday PM, not Monday AM
• National peak hour travel times were down in the first half of 2008 for every hour and for every day of the week
• The relationship between gas price and Travel Time Index (TTI) on a city-by-city basis can be interpreted through a combination of socio-economic, political, demographic and psychographic factors
• The largest and most congested U.S. cities did not respond the same to changing gas prices. Fuel prices had significantly higher influence on traffic in Los Angeles, Atlanta, Miami, Las Vegas than, surprisingly, in areas with heavy public transportation infrastructure including New York City, Washington, D.C., and Chicago
• The strongest and most significant correlations between increase in gas prices and reductions in traffic congestion appear to occur in metros, such as Atlanta, where people’s behavior can change the most based upon investments in local transportation infrastructure and socio-economic factors
  

  Two TTI Forecast scenarios for 2009, based upon different gas price increase rates.
  Left-side assumes gas price variations revert to levels consistent with extrapolating
  2006-07 average annual retail prices. Right-hand side assumes
  gas prices continue in the trend set in 2007-08
• Only three of the top 10 most populated metropolitan areas showed significant correlation between gas prices and traffic congestion
• 75% of Midwesterners decreased their amount of driving, compared to those in the Northeast (60%), South (67%), and West (61%)
• Usage of public transportation rose by 5.2 percent in the second quarter of 2008 with almost 140 million more trips taken than the second quarter of 2007. This major uptick in ridership broke the record increase set in 2007 for the highest number of trips taken on U.S. public transportation in 50 years (10.3 billion trips for the full year)
• Relatively modest drops in traffic volumes can lead to substantial drops in congestion. This bodes very well for initiatives geared to influencing demand during peak periods, such as pricing or managed lanes, or technology steps such as traffic-influenced dynamic routing and advanced carpooling
• INRIX expects that the corresponding decrease in gas prices in the second half of 2008 is being counterbalanced by the overall economic uncertainty throughout the country
• We forecast the changes to discretionary driving that began in early 2008 will continue at a significant level even with low gas prices

Whichever scenario plays out, we expect the next few months to continue to be a wild ride. In the first quarter of 2009, INRIX will publish an annual update to the INRIX National Traffic Scorecard, ranking the 100 Most Congested Metros and the 100 Worst Traffic Bottlenecks. In the report, we will provide a look at traffic congestion nationally and by metro for the entire calendar year of 2008. Stay tuned!