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Gasoline prices, gasoline consumption, and new-vehicle fuel economy: Evidence for a large sample of countries

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  • Burke, Paul J.
  • Nishitateno, Shuhei

Abstract

Countries differ considerably in terms of the price drivers pay for gasoline. This paper uses data for 132 countries for the period 1995–2008 to investigate the implications of these differences for the consumption of gasoline for road transport. To address the potential for simultaneity bias, we use both a country's oil reserves and the international crude oil price as instruments for a country's average gasoline pump price. We obtain estimates of the long-run price elasticity of gasoline demand of between −0.2 and −0.5. Using newly available data for a sub-sample of 43 countries, we also find that higher gasoline prices induce consumers to substitute to vehicles that are more fuel-efficient, with an estimated elasticity of +0.2. Despite the small size of our elasticity estimates, there is considerable scope for low-price countries to achieve gasoline savings and vehicle fuel economy improvements via reducing gasoline subsidies and/or increasing gasoline taxes.

Suggested Citation

  • Burke, Paul J. & Nishitateno, Shuhei, 2013. "Gasoline prices, gasoline consumption, and new-vehicle fuel economy: Evidence for a large sample of countries," Energy Economics, Elsevier, vol. 36(C), pages 363-370.
  • Handle: RePEc:eee:eneeco:v:36:y:2013:i:c:p:363-370
    DOI: 10.1016/j.eneco.2012.09.008
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    Cited by:

    1. Yi-Xuan Gao & Hua Liao & Paul J. Burke & Yi-Ming Wei, 2015. "Road transport energy consumption in the G7 and BRICS: 1973-2010," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 38(4/5/6), pages 342-356.
    2. repec:eee:eneeco:v:68:y:2017:i:c:p:454-465 is not listed on IDEAS
    3. Burke, Paul J. & Liao, Hua, 2015. "Is the price elasticity of demand for coal in China increasing?," China Economic Review, Elsevier, vol. 36(C), pages 309-322.
    4. Burke, Paul J. & Yang, Hewen, 2016. "The price and income elasticities of natural gas demand: International evidence," Energy Economics, Elsevier, vol. 59(C), pages 466-474.
    5. repec:aen:journl:ej38-si1-davis is not listed on IDEAS
    6. Burke, Paul J. & Csereklyei, Zsuzsanna, 2016. "Understanding the energy-GDP elasticity: A sectoral approach," Energy Economics, Elsevier, vol. 58(C), pages 199-210.
    7. Chai, Jian & Yang, Ying & Wang, Shouyang & Lai, Kin Keung, 2016. "Fuel efficiency and emission in China's road transport sector: Induced effect and rebound effect," Technological Forecasting and Social Change, Elsevier, vol. 112(C), pages 188-197.
    8. Paul J. Burke & Shuhei Nishitateno, 2015. "Gasoline Prices And Road Fatalities: International Evidence," Economic Inquiry, Western Economic Association International, vol. 53(3), pages 1437-1450, July.
    9. Paul J. Burke, 2014. "Green Pricing in the Asia Pacific: An Idea Whose Time Has Come?," Asia and the Pacific Policy Studies, Wiley Blackwell, vol. 1(3), pages 561-575, September.
    10. repec:eee:transa:v:106:y:2017:i:c:p:22-50 is not listed on IDEAS
    11. Lee, Yongseung & Kim, Chongman & Shin, Juneseuk, 2016. "A hybrid electric vehicle market penetration model to identify the best policy mix: A consumer ownership cycle approach," Applied Energy, Elsevier, vol. 184(C), pages 438-449.
    12. repec:eee:transa:v:103:y:2017:i:c:p:154-171 is not listed on IDEAS
    13. Lucas W. Davis, 2017. "The Environmental Cost of Global Fuel Subsidies," The Energy Journal, International Association for Energy Economics, vol. 0(KAPSARC S).
    14. Abate, Megersa, 2014. "Does fuel price affect trucking industry’s network characteristics?: evidence from Denmark," Working papers in Transport Economics 2014:26, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    15. Burke, Paul J. & Dundas, Guy, 2015. "Female Labor Force Participation and Household Dependence on Biomass Energy: Evidence from National Longitudinal Data," World Development, Elsevier, vol. 67(C), pages 424-437.
    16. repec:eee:transa:v:105:y:2017:i:c:p:167-180 is not listed on IDEAS
    17. Burke, Paul J. & Batsuuri, Tsendsuren & Yudhistira, Muhammad Halley, 2017. "Easing the traffic: The effects of Indonesia’s fuel subsidy reforms on toll-road travel," Transportation Research Part A: Policy and Practice, Elsevier, vol. 105(C), pages 167-180.
    18. van den Bijgaart, Inge, 2016. "Essays in environmental economics and policy," Other publications TiSEM 298bee2a-cb08-4173-9fe1-8, Tilburg University, School of Economics and Management.
    19. Arzaghi, Mohammad & Squalli, Jay, 2015. "How price inelastic is demand for gasoline in fuel-subsidizing economies?," Energy Economics, Elsevier, vol. 50(C), pages 117-124.
    20. repec:kap:enreec:v:69:y:2018:i:1:d:10.1007_s10640-016-0067-6 is not listed on IDEAS
    21. repec:aen:journl:ej39-2-burke is not listed on IDEAS
    22. Paul J. Burke and Ashani Abayasekara, 2018. "The Price Elasticity of Electricity Demand in the United States: A Three-Dimensional Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).

    More about this item

    Keywords

    Vehicle; Gasoline demand; Fuel use; Fuel economy; Gasoline price;

    JEL classification:

    • N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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