Effects of Gasoline Prices on
Driving Behavior and Vehicle Markets
January 2008
© Jupiter Images Corp.
Numbers in the text and tables may not add up to totals because of rounding.
Photographs for the cover were taken by David Austin (lower left) and Maureen Costantino (lower right).
Preface
Over the past several years, gasoline prices have risen well above their historic average. In many parts of the United States, gasoline prices were above $3 per gallon for much of 2007. Although consumers in the past did not respond very much to small fluctuations in the price of gasoline, the recent large increases have led many people to make adjustments, for example, in the way they drive and in the kinds of vehicles they buy.
This Congressional Budget Office (CBO) study—prepared at the request of the Ranking Member of the Senate Budget Committee—relates rising gasoline prices to changes in how fast people drive, the volume of highway traffic, and rail transit ridership. It also examines the effects on market shares, fuel economy, and pricing of cars and light trucks purchased over the past several years. With the worldwide price of oil continuing to rise, this study provides an indication of the kinds of adjustments consumers would make if gasoline prices continue to rise, and of the implications of rising gasoline prices for policies that would discourage gasoline consumption and thus limit the growth in carbon dioxide emissions. In keeping with CBO’s mandate to provide objective, impartial analysis, the study makes no recommendations.
David Austin of CBO’s Microeconomic Studies Division wrote the study, with input from Tyler Kruzich on total gasoline consumption, and with supervision from Joseph Kile and David Moore. Sarah West of Macalester College provided valuable comments, as did Juan Contreras, Robert Dennis, Kim Kowaleswki, John Peterson, Robert Sunshine, Adam Weber, and G. Thomas Woodward of CBO; and Arlene Holen and Donald Marron, formerly of CBO. (The assistance of external reviewers implies no responsibility for the final product, which rests solely with CBO.) Kate Kelly edited the study with assistance from John Skeen. Christine Bogusz proofread the study, and Angela McCollough prepared the final draft of the manuscript. Maureen Costantino designed the cover and prepared the report for publication with assistance from Allan Keaton. Lenny Skutnik printed the initial copies, Linda Schimmel coordinated the print distribution, and Simone Thomas prepared the electronic version for CBO’s Web site.
January 2008
Contents
Gasoline Prices and Driving Behavior
Applicability of Findings to Other Regions of the United States
Gasoline Prices and Vehicle Markets
Market Shares for Cars and Light Trucks
Gasoline Prices and Vehicle Market Shares
Changes in New-Vehicle Fuel Economy and Pricing
Changes in the Used-Vehicle Market
Analytical Approach and Econometric Results
1-1. Estimated Effect of a 20 Percent Increase in Gasoline Price on Relative Traffic Volume
1-2. Value of Fuel Saved by Slowing from 70 Miles per Hour, as a Function of the Price of Gasoline
1-3. Average Weekend Speeds on Three California Highways, 2003 to 2006
1-4. Estimated Effect of a 50 Cent Increase in the Price of Gasoline on Highway Speeds
2-1. Market Shares of Different Types of New Vehicles, 2004 to 2006
2-2. Estimated Effect of a 20 Percent Increase in the Price of Gasoline on U.S. Market Shares of New Passenger Vehicles
2-3. National Average Gasoline Prices, 2000 to 2006
2-4. Average Monthly Change in Price of Used Vehicles, 2002 to 2006
A-1. Vehicle Detector Stations in Sample
B-1. Sample Means and Vehicle Speeds, January 2003 to December 2006
B-2. Vehicle Speeds and Gasoline Prices, Primary Econometric Results
B-3. Sample Means for Total Daily Vehicles, April 2003 to December 2006
B-4. Total Trips and Gasoline Prices, Primary Econometric Results
S-1. Personal Consumption Expenditures for Gasoline and the Average Price of Gasoline in the United States
1-1. Fuel Consumption and Vehicle Speed
2-1. Market Share of Cars versus Light Trucks, 1976 to 2007
2-2. Passenger Vehicle Market Shares and the Real Price of Gasoline, 2004 to 2006
2-3. Average Rated Fuel Economy for New U.S. Passenger Vehicles, 1975 to 2006
2-4. Average Wholesale Prices for Used Vehicles, July 2002 to July 2006
A-1. Daily Traffic Volume, I-8, San Diego, California
A-2. Weekend Speeds on I-680, San Ramon, California, April 2006
A-3. Median Weekend Speeds on I-405, Orange County, California, and Gasoline Prices
1-1. Empirical Results and the Value of Time and Safety
1-2. Declining Purchases of Midgrade and Premium Gasoline
2-1. Modeling the Influence of the Price of Gasoline on Vehicle Market Shares
2-2. CAFE Implications of Rising Average Fuel Economy
For sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800
Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC 20402-0001
ISBN 978-0-16-079931-0
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