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Reducing Petroleum Consumption from Transportation

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  • Christopher R. Knittel

Abstract

The United States consumed more petroleum-based liquid fuel per capita than any other OECD-high-income country - 30 percent more than the second-highest country (Canada) and 40 percent more than the third-highest (Luxemburg). This paper examines the main channels through which reductions in U.S. oil consumption might take place: (a) increased fuel economy of existing vehicles, (b) increased use of non-petroleum-based low-carbon fuels, (c) alternatives to the internal combustion engine, and (d) reduced vehicles miles travelled. I then discuss how the policies for reducing petroleum consumption used in the US compare with the standard economics prescription for using a Pigouvian tax to deal with externalities. Taking into account that energy taxes are a political hot button in the United States, and also considering some evidence that consumers may not correctly value fuel economy, I offer some thoughts about the margins on which policy aimed at reducing petroleum consumption would have the largest impact on economic efficiency.

Suggested Citation

  • Christopher R. Knittel, 2012. "Reducing Petroleum Consumption from Transportation," NBER Working Papers 17724, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:17724
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    References listed on IDEAS

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    1. Weinert, Jonathan X. & Lipman, Timothy, 2006. "An Assessment of the Near-Term Costs of Hydrogen Refueling Stations and Station Components," Institute of Transportation Studies, Working Paper Series qt65f0n732, Institute of Transportation Studies, UC Davis.
    2. Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel & Nathan C. Parker, 2015. "Some Inconvenient Truths about Climate Change Policy: The Distributional Impacts of Transportation Policies," The Review of Economics and Statistics, MIT Press, vol. 97(5), pages 1052-1069, December.
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    11. Jonathan E. Hughes & Christopher R. Knittel & Daniel Sperling, 2008. "Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand," The Energy Journal, International Association for Energy Economics, vol. 29(1), pages 113-134.
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    14. Christopher R. Knittel & Ryan Sandler, 2011. "Cleaning the Bathwater with the Baby: The Health Co-Benefits of Carbon Pricing in Transportation," NBER Working Papers 17390, National Bureau of Economic Research, Inc.
    15. Christopher R. Knittel & Ryan Sandler, 2011. "Carbon Prices and Automobile Greenhouse Gas Emissions: The Extensive and Intensive Margins," NBER Chapters,in: The Design and Implementation of U.S. Climate Policy, pages 287-299 National Bureau of Economic Research, Inc.
    16. Austin, David & Dinan, Terry, 2005. "Clearing the air: The costs and consequences of higher CAFE standards and increased gasoline taxes," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 562-582, November.
    17. Christopher R. Knittel, 2011. "Automobiles on Steroids: Product Attribute Trade-Offs and Technological Progress in the Automobile Sector," American Economic Review, American Economic Association, vol. 101(7), pages 3368-3399, December.
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    Cited by:

    1. Cook, Jonathan A. & Sanchirico, James N. & Salon, Deborah & Williams, Jeffrey, 2015. "Empirical distributions of vehicle use and fuel efficiency across space: Implications of asymmetry for measuring policy incidence," Transportation Research Part A: Policy and Practice, Elsevier, vol. 78(C), pages 187-199.
    2. Lucas W. Davis, 2014. "The Economic Cost of Global Fuel Subsidies," American Economic Review, American Economic Association, vol. 104(5), pages 581-585, May.
    3. Payne, James E. & Vizek, Maruška & Lee, Junsoo, 2017. "Stochastic convergence in per capita fossil fuel consumption in U.S. states," Energy Economics, Elsevier, vol. 62(C), pages 382-395.
    4. De Borger, Bruno & Mulalic, Ismir & Rouwendal, Jan, 2016. "Measuring the rebound effect with micro data: A first difference approach," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 1-17.
    5. Mamedov, Arseny & Hudko, Hudko & Belev, Sergei & Moguchev, Nikita Sergeevich, 2016. "Comparative Analysis of the Effectiveness of Individual Instruments of State Investment Policy," Working Papers 3052, Russian Presidential Academy of National Economy and Public Administration.
    6. Li, Tongzhe & McCluskey, Jill J., 2017. "Consumer preferences for second-generation bioethanol," Energy Economics, Elsevier, vol. 61(C), pages 1-7.
    7. Kenneth A. Small, 2017. "The Elusive Effects of CAFE Standards," Working Papers 171803, University of California-Irvine, Department of Economics.
    8. Philippe Aghion & Antoine Dechezleprêtre & David Hémous & Ralf Martin & John Van Reenen, 2016. "Carbon Taxes, Path Dependency, and Directed Technical Change: Evidence from the Auto Industry," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 1-51.
    9. Hooi Hooi Lean & Vinod Mishra & Russell Smyth, 2016. "Conditional convergence in US disaggregated petroleum consumption at the sector level," Applied Economics, Taylor & Francis Journals, vol. 48(32), pages 3049-3061, July.
    10. Valadkhani, Abbas, 2014. "Dynamic effects of rising oil prices on consumer energy prices in Canada and the United States: Evidence from the last half a century," Energy Economics, Elsevier, vol. 45(C), pages 33-44.
    11. Matthew E. Kahn & Jerry Nickelsburg, 2016. "An Economic Analysis of U.S Airline Fuel Economy Dynamics from 1991 to 2015," NBER Working Papers 22830, National Bureau of Economic Research, Inc.
    12. Christopher R. Knittel, 2014. "The Political Economy of Gasoline Taxes: Lessons from the Oil Embargo," Tax Policy and the Economy, University of Chicago Press, vol. 28(1), pages 97-131.
    13. Scheitrum, Daniel, 2017. "Renewable Natural Gas as a Solution to Climate Goals: Response to California's Low Carbon Fuel Standard," MPRA Paper 77193, University Library of Munich, Germany.
    14. Christopher R. Knittel, 2013. "The Energy-Policy Efficiency Gap: Was There Ever Support for Gasoline Taxes?," NBER Working Papers 18685, National Bureau of Economic Research, Inc.
    15. 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).
    16. repec:aen:journl:ej38-6-scheitrum is not listed on IDEAS
    17. Solarin, Sakiru Adebola & Lean, Hooi Hooi, 2016. "Are fluctuations in oil consumption permanent or transitory? Evidence from linear and nonlinear unit root tests," Energy Policy, Elsevier, vol. 88(C), pages 262-270.
    18. Chia-Wen Chen & Wei-Min Hu & Christopher R. Knittel, 2017. "Subsidizing Fuel Efficient Cars: Evidence from China's Automobile Industry," NBER Working Papers 23045, National Bureau of Economic Research, Inc.
    19. Seema Jayachandran & Joost de Laat & Eric F. Lambin & Charlotte Y. Stanton, 2016. "Cash for Carbon: A Randomized Controlled Trial of Payments for Ecosystem Services to Reduce Deforestation," NBER Working Papers 22378, National Bureau of Economic Research, Inc.
    20. Ian A. Lange & Sarah Polborn, 2012. "Can Lobbying Encourage Abatement? Designing a New Policy Instrument," CESifo Working Paper Series 3760, CESifo Group Munich.
    21. Cui, Qiang & Li, Ye, 2015. "An empirical study on the influencing factors of transportation carbon efficiency: Evidences from fifteen countries," Applied Energy, Elsevier, vol. 141(C), pages 209-217.
    22. Jesús Rodríguez-López & Gustavo A. Marrero & Rosa Marina González-Marrero, 2015. "Dieselization, CO2 emissions and fuel taxes in Europe," Working Papers 15.11, Universidad Pablo de Olavide, Department of Economics.
    23. Hirte, Georg & Tscharaktschiew, Stefan, 2013. "The optimal subsidy on electric vehicles in German metropolitan areas: A spatial general equilibrium analysis," Energy Economics, Elsevier, vol. 40(C), pages 515-528.
    24. repec:kap:transp:v:45:y:2018:i:2:d:10.1007_s11116-016-9741-3 is not listed on IDEAS
    25. Zhang, Xiao-Bing, 2014. "Optimal strategic oil stockpiling and import tariffs: The case of China," Energy Economics, Elsevier, vol. 45(C), pages 463-474.

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • L0 - Industrial Organization - - General
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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