Effects on Alternative Fuel Infrastructure on Key Effects on Alternative Fuel Infrastructure on Key Transportation Economic Metrics

The Washington State Department of Transportation (WSDOT) is responsible for planning, operating and maintaining a highway network consisting of over 18,500 lane-miles of highway. About 86 million vehicle miles per day operate on this highway network. Planning and building highways is by its nature a long-range enterprise. It requires making many assumptions about future travel demand and the fuel tax revenue needed to fund highway construction and maintenance. In recent years the growing uncertainty about future fuel prices and availability has made long range planning even more challenging. Rather than relying on simple trend extrapolation or forecasts that are political in origin, this study is intended to use market mechanisms to shed light on key long-range transportation planning assumptions. In particular, this study will help WSDOT assess the likelihood natural gas will substitute for petroleum fuels, as well as estimate the impact fuel prices will have on travel demand (vehicle miles traveled) and on fuel tax revenues. The uncertainty of future fuel tax revenue provides a major challenge to meeting the needs of a highly utilized but aging roadway infrastructure. Uncertainty in oil prices that lead to increases the cost to drivers threaten this revenue along with the increasingly efficient vehicles being introduced into the vehicle fleet. With oil prices on the rise it is natural for drivers to conserve funds by driving less and/or purchasing more fuel-efficient vehicles. Two immediate effects of reduced fuel usage are the reduction in fuel tax revenue, which makes budgeting more challenging, and lower greenhouse gas (GHG) emissions, a goal of WSDOT. Natural gas provides an attractive substitute for petroleum. Prices have fallen more than sixty percent from their peak in 2008. Proven reserves are approaching all time high levels (despite reduced exploration). The increasing price for petroleum and decreasing price for natural gas, at BTU parity quantities, means a cost advantage for natural gas. Natural gas also has the attractive feature of emitting fewer GHG, specifically CO2, increasing progress toward climate change goals. One item of key importance is the degree to which consumers and suppliers respond both to price changes and to a changing regulatory environment. Forecasting changes in natural gas usage in vehicles over time is complicated by the fact that consumers cannot easily, given the current infrastructure, switch fuel types in response to short-run price changes. Accurate forecasting requires an understanding of how changing prices affect consumer vehicle purchase and scrappage decisions and how those decisions affect vehicle fleet composition change over time. Price and regulatory changes can therefore have sharply different short- and long-run effects. Current research indicates, for example, that increased gasoline prices lead to a reduction in vehicle miles of travel (VMT) in the short run and to the purchase of more fuel-efficient vehicles. A key feature of the proposed study will be to assess the degree to which price can be expected to result in increased use or adoption of CNG vehicles.