Fuel Consumption and Fuel Efficiency

With an increase in fuel efficiency (in miles per gallon) marginal fuel consumption decreases. The most significant fuel consumption benefits are achieved in the lower ranges of improvements. For instance, an improvement from 10 to 20 miles per gallon reduces fuel consumption by 50% while an improvement from 20 to 30 miles per gallon will reduce fuel consumption by 33%. Thus, vehicle-wise a significant fuel economy is reached if a consumer switches from a Sport Utility Vehicle (15 miles per gallon) to a regular car (25 miles per gallon). Although switching a more fuel efficient vehicle such as an hybrid (35 miles per gallon) result in fuel economy gains, they are not marginally that significant for an individual consumer (another matter at the aggregate level). Particularly, if the purchase price of a more energy efficient vehicle does not compensate for the gain in fuel efficiency, then it is not a rational choice from an economic standpoint. Therefore, for fuel efficiency to be beneficial for a society, the price of the vehicle should remain similar, or at least its fuel efficiency should compensate for its higher price.