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As gas prices fall, Americans are buying thirstier cars

Our cars are getting bigger again

Justin Sullivan/Getty Images

Americans really like their SUVs. The problem is that trucks and SUVs cost more money to fill the tank than small, more fuel-efficient cars. As gas prices rise, vehicle buyers have a powerful incentive to value fuel efficiency higher.

That's partly why the fuel efficiency of the average new vehicle in America rose from a little more than 20 mpg in 2007 to more than 25 mpg by 2014. But then, nearly in line with a dramatic drop in gas prices, Americans began buying bigger, thirstier cars again.

UMich MPG Chart

GasBuddy Gas Chart

Data from the Transportation Research Institute at the University of Michigan shows that the average car, truck, or SUV sold in America in December fell to just 24.9 mpg, the first time the Institute has seen a sub-25 mpg average in nearly two years.

To be sure, the average is still significantly higher than it was eight years ago, thanks to technological advances and government regulations requiring car companies to develop and sell more fuel-efficient vehicles.

Buying a car is a complex emotional and financial process, and determining which incentives drive people to choose a particular vehicle could fill a thousand economics PhD theses, but at least we now have some data to back up what everyone intuitively knows: when gas prices are lower, people buy bigger cars. Economics in a nutshell.