IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

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

  • Paul J. Burke

    ()

  • Shuhei Nishitateno

Countries differ considerably in terms of the price drivers pay for gasoline. This paper uses data for a large sample of countries to provide new evidence on the implications of these differences for the consumption of gasoline for road transport and the fuel economy of new vehicles. To address the potential for simultaneity bias in ordinary least squares estimation, we use a country's oil reserves as an instrument for its average gasoline pump price. We obtain estimates of the long-run price elasticity of gasoline demand of between -0.2 and -0.4, a smaller elasticity than most existing estimates. The results also indicate that higher gasoline prices induce consumers to substitute to vehicles that are more fuel-efficient, with an estimated elasticity of +0.2. While gasoline demand and fuel economy are both inelastic with respect to gasoline prices, 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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2011/wp_econ_2011_15.pdf
Download Restriction: no

Paper provided by The Australian National University, Arndt-Corden Department of Economics in its series Departmental Working Papers with number 2011-15.

as
in new window

Length: 47 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:pas:papers:2011-15
Contact details of provider: Postal:
Crawford Building, Lennox Crossing, Building #132, Canberra ACT 2601

Phone: +61 2 6125 4705
Fax: +61 2 6125 5448
Web page: https://crawford.anu.edu.au/acde/publications/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Bentzen, Jan, 1994. "An empirical analysis of gasoline demand in Denmark using cointegration techniques," Energy Economics, Elsevier, vol. 16(2), pages 139-143, April.
  2. Joshua D. Angrist & Alan B. Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 69-85, Fall.
  3. Angus Deaton & Alan Heston, 2008. "Understanding PPPs and PPP-based national accounts," NBER Working Papers 14499, National Bureau of Economic Research, Inc.
  4. Sterner, Thomas, 2007. "Fuel taxes: An important instrument for climate policy," Energy Policy, Elsevier, vol. 35(6), pages 3194-3202, June.
  5. Havranek, Tomas & Irsova, Zuzana & Janda, Karel, 2011. "Demand for gasoline is more price-inelastic than commonly thought," CUDARE Working Paper Series 1118, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  6. Henrik Hammar, Asa Lofgren and Thomas Sterner, 2004. "Political Economy Obstacles to Fuel Taxation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-18.
  7. Baltagi, Badi H. & Griffin, James M., 1983. "Gasoline demand in the OECD : An application of pooling and testing procedures," European Economic Review, Elsevier, vol. 22(2), pages 117-137, July.
  8. Rietveld, Piet & van Woudenberg, Stefan, 2005. "Why fuel prices differ," Energy Economics, Elsevier, vol. 27(1), pages 79-92, January.
  9. Espey, Molly, 1996. "Watching the fuel gauge: An international model of automobile fuel economy," Energy Economics, Elsevier, vol. 18(1-2), pages 93-106, April.
  10. Daniel J. Graham & Stephen Glaister, 2002. "The Demand for Automobile Fuel: A Survey of Elasticities," Journal of Transport Economics and Policy, University of Bath, vol. 36(1), pages 1-25, January.
  11. Espey, Molly, 1998. "Gasoline demand revisited: an international meta-analysis of elasticities," Energy Economics, Elsevier, vol. 20(3), pages 273-295, June.
  12. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
  13. Joshua Angrist & Alan Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Working Papers 834, Princeton University, Department of Economics, Industrial Relations Section..
  14. Dahl, Carol A., 2012. "Measuring global gasoline and diesel price and income elasticities," Energy Policy, Elsevier, vol. 41(C), pages 2-13.
  15. repec:cdl:agrebk:2248189 is not listed on IDEAS
  16. Brons, Martijn & Nijkamp, Peter & Pels, Eric & Rietveld, Piet, 2008. "A meta-analysis of the price elasticity of gasoline demand. A SUR approach," Energy Economics, Elsevier, vol. 30(5), pages 2105-2122, September.
  17. repec:fth:prinin:455 is not listed on IDEAS
  18. Clerides, Sofronis & Zachariadis, Theodoros, 2008. "The effect of standards and fuel prices on automobile fuel economy: An international analysis," Energy Economics, Elsevier, vol. 30(5), pages 2657-2672, September.
  19. Akinboade, Oludele A. & Ziramba, Emmanuel & Kumo, Wolassa L., 2008. "The demand for gasoline in South Africa: An empirical analysis using co-integration techniques," Energy Economics, Elsevier, vol. 30(6), pages 3222-3229, November.
  20. Kenneth A. Small & Kurt Van Dender, 2007. "Fuel Efficiency and Motor Vehicle Travel: The Declining Rebound Effect," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 25-52.
  21. Fuller, Wayne A, 1977. "Some Properties of a Modification of the Limited Information Estimator," Econometrica, Econometric Society, vol. 45(4), pages 939-53, May.
  22. Gallagher, Kelly Sims & Muehlegger, Erich, 2008. "Giving Green to Get Green: Incentives and Consumer Adoption of Hybrid Vehicle Technology," Working Paper Series rwp08-009, Harvard University, John F. Kennedy School of Government.
  23. Ramanathan, R., 1999. "Short- and long-run elasticities of gasoline demand in India: An empirical analysis using cointegration techniques," Energy Economics, Elsevier, vol. 21(4), pages 321-330, August.
  24. Shanjun Li & Roger von Haefen & Christopher Timmins, 2008. "How Do Gasoline Prices Affect Fleet Fuel Economy?," NBER Working Papers 14450, National Bureau of Economic Research, Inc.
  25. Lucas W. Davis & Lutz Kilian, 2011. "Estimating the effect of a gasoline tax on carbon emissions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(7), pages 1187-1214, November.
  26. Eltony, M. N. & Al-Mutairi, N. H., 1995. "Demand for gasoline in Kuwait : An empirical analysis using cointegration techniques," Energy Economics, Elsevier, vol. 17(3), pages 249-253, July.
  27. repec:pri:indrel:455 is not listed on IDEAS
  28. Storchmann, Karl, 2005. "Erratum to "Long-run gasoline demand for passenger cars: The role of income distribution" [Energy Economics, 27 (1), 25-58]," Energy Economics, Elsevier, vol. 27(4), pages 687-687, July.
  29. Coyle, David & DeBacker, Jason & Prisinzano, Richard, 2012. "Estimating the supply and demand of gasoline using tax data," Energy Economics, Elsevier, vol. 34(1), pages 195-200.
  30. 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.
  31. Arie Beresteanu & Shanjun Li, 2011. "Gasoline Prices, Government Support, And The Demand For Hybrid Vehicles In The United States," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 161-182, 02.
  32. Wu, De-Min, 1974. "Alternative Tests of Independence between Stochastic Regressors and Disturbances: Finite Sample Results," Econometrica, Econometric Society, vol. 42(3), pages 529-46, May.
  33. William C. Wheaton, 1982. "The Long-Run Structure of Transportation and Gasoline Demand," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 439-454, Autumn.
  34. Ryan, Lisa & Ferreira, Susana & Convery, Frank, 2009. "The impact of fiscal and other measures on new passenger car sales and CO2 emissions intensity: Evidence from Europe," Energy Economics, Elsevier, vol. 31(3), pages 365-374, May.
  35. Storchmann, Karl, 2005. "Long-Run Gasoline demand for passenger cars: the role of income distribution," Energy Economics, Elsevier, vol. 27(1), pages 25-58, January.
  36. Thomas Klier & Joshua Linn, 2010. "The Price of Gasoline and New Vehicle Fuel Economy: Evidence from Monthly Sales Data," American Economic Journal: Economic Policy, American Economic Association, vol. 2(3), pages 134-53, August.
  37. Stern, David I., 2010. "Between estimates of the emissions-income elasticity," Ecological Economics, Elsevier, vol. 69(11), pages 2173-2182, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pas:papers:2011-15. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sandra Zec)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.