A Closer Look at the Impact of Higher Gasoline Prices on Driving

There's been a lot of discussion recently about the effects of high gasoline prices on the quantity demanded of gasoline, as well driving behavior (Jim Hamilton, Jim Hamilton, CR, CR, Paul Krugman). David Austin, whose work I have cited often on this blog, gave a fascinating presentation, entitled "Effects of Gasoline Prices on Driving Behavior and Vehicle Choice" at the recent Society of Government Economists conference in Washington, DC a couple of weeks ago. In it, he tackles some of these issues. (Note, these are his own personal views and do not necessarily represent the views of any specific organization.)

I could discuss each of the graphs in detail, but I think I will let them speak for themselves.

Figure 1: Gasoline consumption has declined as prices have increased. Source: D. Austin, Presentation at SGE, June 2, 2008.



Figure 2:With Higher Gasoline Prices, a Historic Shift in Vehicle Choice. Source: D. Austin, Presentation at SGE, June 2, 2008.



Figure 3:As Gas Prices Doubled (+ $1.50) Fuel Economy Increased by 1 mpg (Helped by higher CAFE standards for light trucks). Source: D. Austin.



Figure 4:Evidence from used-car market. Source: D. Austin, Presentation at SGE, June 2, 2008.

In the presentation, he also analyzes responses in the areas of volume and speed of freeway traffic, rail-transit ridership, and market share of cars vs light trucks.

Some discussion of these issues can be found in this document: Effects of Gasoline Prices on Driving Behavior and Vehicle Markets (January 2008).

Comments

[User 158320:]

Too bad higher prices don't effect our immigration policies, we could all cut use by 1% but if we get 1 or 2% more people from immigration our cutting is obliterated.

2008 Jun 15 04:52 AM

[Paul Killinger:]

Indeed, that's our dilemma. Should gasoline prices stay at their current levels or go higher, we will continue to see significant so-called "demand destruction" in the use of gasoline. Conversely, the more we successfully increase supplies, the greater the likelihood we will revert to our previous profligate use of this fuel.

2008 Jun 15 10:37 AM

[Shaggieman:]

I heard gasoline in Mexico runs $2.75 per gallon cause of the Gov subsidies. So a lot of Mexicans I talk with are either going back or making plans to. They all say "it's better over there" and I believe them. I don't think we'll see big immigration from now on as things are worse here from the immigrants perspective.

Demand was up last week to 9.5 mgpd from 9.1 mgpd of gasoline.

2008 Jun 15 10:49 AM

[jimocarroll:]

It won't be too good in Mexico if we keep diverting corn from their tortillas to our gas tanks. Ethanol is folly. Drill here, drill now, and save a taco.

2008 Jun 15 10:55 AM

[cynic69:]

Imagine the effect that less driving is going to have on the U.S. economy. Hundreds of millions of people are involved in building cars and maintaining them. As the total number of miles driven decreases the number of layoffs in the auto industry is going to increase. These layoffs are going to throw the economy into a tailspin. When folks get layed off they won't need to drive to work. This feedback loop is going to be very nasty. Similar problems are going to occur in the airline industry.

2008 Jun 15 11:49 AM

[Dusty:]

A lot of driving is unnecessary or recreational. Multiple trips could often be reduced to one trip with planning. For time alone or just to 'get out of the house/apartment' a trip around town for an hour or two was cheap. Recreational traffic makes an amazing difference on the roads everytime gasoline prices spike. Commercial drivers are well aware.

2008 Jun 15 03:15 PM

[HHWCA:]

As a small survey today (Sunday 6/15) I drove my Camry on speed control at 68 mph. I was constantly passed by other vehicles. 7 & out 10 of the other vehicles was an SUV or large pickup! I have to guess that these other drivers must make a lot more money than I do!

2008 Jun 15 11:34 PM

[FrankNJ:]

User 41124, Were the SUV's and trucks passing you carrying many people, or were they driving their full size truck/SUV with one person only, similar to you driving your full size Camry with only you in it?

2008 Jun 16 11:49 AM

[TBill:]

Just returned from a long road trip. The high gas prices modified my behavior. Instead of driving my jeep, guzzling gas, driving at 65, averaging less, I rented a 35 mpg Mazda and averaged 70 mph between MI and Memphis, and 74 between Memphis and Ft. Worth! [Figures from my GPS] I pass everybody.

2008 Jun 16 02:26 PM

[Danny Newton:]

After the next election, there is likely to be an even bigger increase in gas prices to fund the next transportation bill. The House and the Senate. After the next election, there is likely to be an even bigger increase in gas prices to fund the next transportation bill. The House and the Senate have separate versions but neither can be funded with the existing pay-go rules. That means a rather large tax increase. Once the feds raise the taxes, the states will have to raise taxes to match the new money created.

In 1980 there were 28.6 people per lane mile of road in the United States. In 2004 there were 35.1 people per lane mile. The infrastructure is shrinking with respect to the population increase. This shrinkage is more profound in urban areas but some rural areas are now experiencing congestion. The percentage of trucks on the road is at a level that was never predicted 35 years ago. This policy is a threat to productivity.

The inflation adjusted price of a new car is actually down from 1990 to 2005 in spite of government edicts on safety and fuel economy. That trend can not however compensate for the increase in gas prices and deferred construction and maintenance of the road infrastructure. The cost of transportation has to go up and the area that people may roam looking for and commuting to a job is shrinking. States with large dependency on sales taxes are going to be wanting to invent new ways to pay for their activities. The consumption of this national asset has helped the economy restructure itself but can not continue indefinitely.

2008 Jun 17 12:09 AM

[casey00001:]

site-ing Paul Krugman as a source lowers your credibility from the start.

2008 Jul 10 09:13 AM

[fireball:]

user41124 to some of us time is more precious than money. galewhitaker only a short time seems to prove your observations. paul8756 some of us like to make fast cars go fast. just kidding my habits have changed and i am not being pressed yet.

2008 Jul 10 11:52 AM