Traffic is getting worse—here's how to trade it

The U.S. Department of Transportation reported last week that U.S. vehicle miles traveled for September, measured on a 12-month rolling basis, had increased by 4.3 percent. Vehicle miles traveled have increased rapidly since the collapse of oil prices last year.

Source: U.S. Dept of Transportation, U.S. Bureau of Labor Statistics via FRED, civilian non-institutional population aged 16+

Not only are more people driving, the average licensed driver is driving more—a huge turn around over the last year and a half. Unbelievable as it may seem, the average U.S. driver was driving 1,140 miles less per year in March 2014 than at the earlier peak in 2005. Put another way, the average driver was behind the wheel the equivalent of a month less in early 2014 than he had been nine years earlier. This constitutes an unprecedented loss of mobility for American society, and it is hardly a surprise that the economy should have struggled through that stretch. No car, no job.

All this changed with the collapse of oil prices last summer. Like flowers after a good rain, mobility is once again blossoming. The average driver is beginning to behave as he did before high oil prices crippled the economy. Indeed, if our projections are correct, the typical U.S. driver should recover peak per-capita driving levels by late 2017 to mid-2018.

For investors, this suggests opportunities related to transportation will be strong. This will include road construction, a need for more hotels, an increased popularity of office parks in the exurbs, more suburban trophy houses and a boom in remote tourism, including beach homes and trips to places like Disney World in Orlando.

On the flip side, government needs to be aware that our infrastructure for a decade has reflected declining mobility, and this has changed. We will need new roads and upgrades to existing ones. As ever, expect government to be well behind the curve, with traffic worsening throughout the country, and particularly in fast developing suburban areas.

Overall, look for road traffic to be up by 10 percent over the next three years, and as usual, and our policy makers to be unprepared. So, if you think traffic is bad now, relax, it will get a lot worse.

Commentary by Steven Kopits, managing director, Princeton Energy Advisors.