Fuel efficiency is a form of thermal efficiency, meaning the ratio of effort to result of a process that converts chemical potential energy contained in a carrier (fuel) into kinetic energy or work. Overall fuel efficiency may vary per device, which in turn may vary per application, and this spectrum of variance is often illustrated as a continuous energy profile. Non-transportation applications, such as industry, benefit from increased fuel efficiency, especially fossil fuel power plants or industries dealing with combustion, such as ammonia production during the Haber process.

In the context of transport, fuel economy is the energy efficiency of a particular vehicle, given as a ratio of distance traveled per unit of fuel consumed. It is dependent on several factors including engine efficiency, transmission design, and tire design. In most countries, using the metric system, fuel economy is stated as "fuel consumption" in liters per 100 kilometers (L/100 km) or kilometers per liter (km/L or kmpl). In a number of countries still using other systems, fuel economy is expressed in miles per gallon (mpg), for example in the US and usually also in the UK (imperial gallon); there is sometimes confusion as the imperial gallon is 20% larger than the US gallon so that mpg values are not directly comparable. Traditionally, litres per mil were used in Norway and Sweden, but both have aligned to the EU standard of L/100 km.

Fuel consumption is a more accurate measure of a vehicle's performance because it is a linear relationship while fuel economy leads to distortions in efficiency improvements. Weight-specific efficiency (efficiency per unit weight) may be stated for freight, and passenger-specific efficiency (vehicle efficiency per passenger) for passenger vehicles.