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The effect of fuel prices on traffic flows: Evidence from New South Wales

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  • Tong Zhang
  • Paul J. Burke

Abstract

Understanding how traffic flows respond to fuel price changes is useful for traffic management. This study uses a dataset of 11.9 million hourly observations from 118 traffic count stations over 2010–2017 to investigate the relationship between the gasoline price and traffic flows in the state of New South Wales, Australia. The findings suggest that higher gasoline prices reduce traffic flows, with an average effect size of –0.04 in the hourly estimates. The elasticity is particularly pronounced during off-peak periods, both on weekdays (–0.10) and weekends (–0.07). In contrast, a positive effect of gasoline prices on traffic flows is observed for peak periods on weekdays (0.06). Evidence is also obtained that afternoon peak-hour speeds are faster when gasoline prices are higher, consistent with a lowering of traffic density. The research also finds a negative price elasticity of gasoline demand and that people are more likely to use public transport when gasoline prices are higher. The findings suggest that fuel excise plays a role in both reducing overall road dependence and alleviating the severity of some peak-hour traffic jams.

Suggested Citation

  • Tong Zhang & Paul J. Burke, 2020. "The effect of fuel prices on traffic flows: Evidence from New South Wales," CAMA Working Papers 2020-86, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2020-86
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2020-10/86_2020_burke_zhang1_0.pdf
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    Cited by:

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    2. Zhang, Tong & Burke, Paul J., 2022. "The effect of gasoline prices on suburban housing values in China," China Economic Review, Elsevier, vol. 72(C).
    3. Ahmed, Kashif & Kamihigashi, Takashi & Matsuo, Miwa, 2023. "Positive fuel price elasticities of expressway traffic flows: Insights for policymakers and management strategists," Transport Policy, Elsevier, vol. 142(C), pages 99-114.
    4. Paul J. Burke, 2023. "On the way out: Government revenues from fossil fuels in Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(1), pages 1-17, January.
    5. Dawei Li & Yiping Liu & Yuchen Song & Zhenghao Ye & Dongjie Liu, 2022. "A Framework for Assessing Resilience in Urban Mobility: Incorporating Impact of Ridesharing," IJERPH, MDPI, vol. 19(17), pages 1-20, August.
    6. NISHITATENO Shuhei & Paul J. BURKE & ARIMURA Toshi H., 2023. "Road Traffic Flow and Air Pollution Concentrations: Evidence from Japan," Discussion papers 23031, Research Institute of Economy, Trade and Industry (RIETI).

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    More about this item

    Keywords

    gasoline price; traffic flow; speed; road transport; public transport;
    All these keywords.

    JEL classification:

    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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