High Frequency Evidence on the Demand for Gasoline (original) (raw)
Demand for gasoline is more price-inelastic than commonly thought
Energy Economics, 2012
One of the most frequently examined statistical relationships in energy economics has been the price elasticity of gasoline demand. We conduct a quantitative survey of the estimates of elasticity reported for various countries around the world. Our meta-analysis indicates that the literature suffers from publication selection bias: insignificant or positive estimates of the price elasticity are rarely reported, although implausibly large negative estimates are reported regularly. In consequence, the average published estimates of both shortand long-run elasticities are exaggerated twofold. Using mixed-effects multilevel meta-regression, we show that after correction for publication bias the average long-run elasticity reaches − 0.31 and the average short-run elasticity only − 0.09.
The demand for gasoline: a two stage approach
International Journal of Forecasting, 1993
The demand for gasoline has typically been estimated using a reduced-form equation model. The simplicity of the approach is attractive, but has proven to be costly in terms of the insights lost as to the nature of the processes governing the interdependence between fuel efficiency and the overall demand for gasoline.
Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand
2006
Understanding the sensitivity of gasoline demand to changes in prices and income has important implications for policies related to climate change, optimal taxation and national security, to name only a few. While the short-run price and income elasticities of gasoline demand in the United States have been studied extensively, the vast majority of these studies focus on consumer behavior in the 1970s and 1980s. There are a number of reasons to believe that current demand elasticities differ from these previous periods, as transportation analysts have hypothesized that behavioral and structural factors over the past several decades have changed the responsiveness of U.S. consumers to changes in gasoline prices. In this paper, we compare the price and income elasticities of gasoline demand in two periods of similarly high prices from 1975 to 1980 and 2001 to 2006. The short-run price elasticities differ considerably: and range from-0.034 to-0.077 during 2001 to 2006, versus-0.21 to-0.34 for 1975 to 1980. The estimated short-run income elasticities range from 0.21 to 0.75 and when estimated with the same models are not significantly different between the two periods. One implication of these findings is that gasoline taxes would need to be significantly larger today in order to achieve an equivalent reduction in gasoline consumption. This, coupled with the political difficulties in adopting gasoline taxes, suggests that policies and technologies designed to improve fuel economy are likely becoming relatively more attractive as a means to reduce fuel consumption.
Analysing gasoline demand elasticities: a survey
Energy Economics, 1991
This paper is a survey of studies on gasoline demand. Although there are very many dxerent studies in this$eld which sometimes appear to arrive at contradictory results, we find that with proper stratification of studies by model and data type much of the contict turns to consensus. In this survey we classtfy studies by data type and by ten d@erent categories of model and with the exception of estimates on seasonal data, which tend to be unstable, and of certain inappropriate model formulations, we find a fair degree of agreement concerning average short-run and even long-run income and price elasticities.
Econometric analysis of the demand for gasoline at the state level
1978
This report was prepared as an account of work sponsored by an agency of the United States Government. Neither the United States Government nor any agency thereof. nor any of their employees, contractors, subcontractors, or their employees, makes any warranty, express or implied, nor assumes any legal liability or responsibility for any third party's use or the results of such use of any information, apparatus, product or process disclosed in this report, nor represents that its use by such third party would not infringe privately owned rights.
An increasing gasoline price elasticity in the United States?
Energy Economics, 2021
This is a PDF file of an article that has undergone enhancements after acceptance, such as the addition of a cover page and metadata, and formatting for readability, but it is not yet the definitive version of record. This version will undergo additional copyediting, typesetting and review before it is published in its final form, but we are providing this version to give early visibility of the article. Please note that, during the production process, errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain.
Revisiting the Price Elasticity of Gasoline Demand
In this document, we investigate the evolution of the income elasticity and the price elasticity of the demand for gasoline over the period 1975-2006. By using the Probabilistic Reduction Approach, we were able to model changes in mean heterogeneity and variance heterogeneity directly into the model. This method allowed us to determine the timing and the size of shifts in the elasticities. Our estimates are consistent with the current literature: there has been a shift in the price elasticity of gasoline demand. This shift, not present in the income elasticity, occurred almost at the beginning of the period of study. We use these estimates to compute several welfare measures. We also present a sketch of the relationship between a Monthly Fixed Effect panel data model and a Time Series Model with Monthly Dummy Variables. JEL Codes: D12, L91, Q31, Q41, C22, C23, C50
Income elasticity of gasoline demand: A meta-analysis
Energy Economics, 2015
Acknowledgments I would like to thank my supervisor PhDr. Tomáš Havránek for the thesis topic and invaluable comments throughout the year. I am also extremely grateful to prof. Carol Dahl, not only for the published papers on gasoline demand, but also for publishing her dataset that was used for this meta-analysis.
Econometrical Study in Gas Prices: G. Gautreaux
The research analysis will explore the conditions precipitating the recent surge in fuel pricing. Inflation along with overpriced fuel have been two of the most salient contemporary anomalies that are challenging the U.S. economy. Determining the origins of the price spikes is relevant today, not only because of its historical significance, but because strong scientific interpretations can minimize the political biases many of these issues have been relegated to. The objective of analysis was not necessarily to illustrate the complexities of all variables that influence the price of oil and gas but rather to understand the relationship between a relevant selection of data that best explain the recent spike in gas prices. The potential success of the research at hand is predicated on both the proper interpretation of econometric results and the application of economic intuition needed to make empirical judgements to determine whether the impact of fuel prices was correlated with a demand or supply shock. Thus, the many assertions that both precipitated and complemented the econometric analyses were based on assumptions from, not only empirical principles, but on a litany of prior research done on energy sector pricing in general. The interpretational data from this study should be applicable to both technical and non-technical audiences collectively. The general population of U.S. consumers have been one group effected by the spike in inflation and fuel prices. Additionally, policymakers, regardless of partisan pressure, should also seek to understand what’s causing the shock in energy pricing, because only in understanding the true results of the model, can they all work together in trying to counteract peak energy pricing by minimizing future occurrence.
The Elasticity of Demand for Gasoline: A Semi-parametric Analysis
Advanced Studies in Theoretical and Applied Econometrics, 2014
We use a semi-parametric conditional median as a robust alternative to the parametric conditional mean to estimate the gasoline demand function. Our approach protects against data and speci cation errors and may yield a more reliable basis for public policy decisions that depend on accurate estimates of gasoline demand. As a comparison, we also estimated the parametric translog conditional mean model. Our semi-parametric estimates imply that gasoline demand becomes more price elastic, but also less income elastic, as incomes rise. In addition, we nd that demand appears to become more price elastic as prices increase in real terms.
Demand for Gasoline in Japan *
To explore the relationship between the price of gasoline, price of substitute goods, and per capita income in Japan, this study suggests and estimates a partial adjust-ment model. Applying the ordinary squares method to the time-series data for the years 1957-99, the suggested model is estimated. The statistical analysis of our study suggests that previous consumption behavior, price of gasoline, price of substitute goods, and in-come are signifi cant variables that determine gasoline consumption in Japan. In the short-run, elasticity of gasoline demand, with respect to price and income, are inelastic, -0.115 and 0.296 respectively. However, for the demand for gasoline in the long-run, income tends to be slightly elastic, 1.056, while price elasticity remains inelastic, -0.411.
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.
Demand analysis of gasoline consumption in Nigeria
Opec Review, 1986
SEVERAL ANALYSES - Baltagi and Griffin (19831, Ramsey et al (19751, Houthakker et a1 (19741, Mehta et a1 (19781, Kraft and Rodekohr (1980) have been carried out in the last decade to model the demand for gasoline consumption. All these studies are econometric in nature and they usually relate gasoline consumption to such independent variables as disposable income, the price of gasoline, the price of substitute fuels or alternative modes of transportation, the efficiency of the automobile fleet, the stock of automobiles, etc. The empirical results of these studies are mostly derived from situations in developed 'countries, especially the United States. While the estimated elasticities usually vary, sometimes widely, among different model specification and estimation procedures, policy instruments, especially price, have been highlighted as a control variable for gasoline demand management. There exist, however, considerable gaps in the literature on the situation in developing countries. One major factor contributing to this situation is, of course, the availability of reliable and consistent energy data bases in most developing countries.
Gasoline Tax as a Corrective Tax: Estimates for the United States, 1970-1991
The Energy Journal, 1996
Gasoline consumption creates externalities, through pollution, road congestion, accidents, and import dependence. What effect would a higher gasoline tax have on the related magnitudes: gasoline consumption, miles driven, and roadfatalities? In this paper, separate models are estimatedfor gasoline use per mile, miles driven per driver, andfatalities per mile driven. We use data from 50 U.S. states and DCfor 1970 through 1991, with a variety of stochastic spectjications. lke own-price elasticity of demand for gasoline is derived from projections with, and without, a higher gasoline tax, and is found to be between-0.12 and-0.17 in the short-run, and between-0.23 and-0.35 in the long-run. A tax of 1pergallonwouldcutuseby15−201 per gallon would cut use by 15-20%) miles driven by 11-12%, and fatalities by 16-18% over 10 years, while raising almost 1pergallonwouldcutuseby15−20100 billion in revenue annually.
European Economic Review, 1983
This study utilizes a pooled inter-country data set, finding the long-run price-elasticity falls in the range -0.55 to -0.9, depending on the choice of pooled estimators. The estimators included the OLS, within-, and between-country estimators, plus five feasible GLS estimators. Even allowing for a ten-year distributed lag on price to reflect changes in auto-efficiency characteristic-s, the within-country estimator yields appreciably more inelastic estimates than did the OS estimator, which was heavily influenced by the between-or inter-country variation. This difference raises intriguing questions for future research.
Gasoline Demand Elasticities at the Backdrop of Lower Oil Prices: Fuel-Subsidizing Country Case
Energies
This study investigates the income and price elasticities of gasoline demand for a fuel subsidizing country case, applying three different time-varying coefficient approaches to the data spanning the period from January 2002 to June 2018. The empirical estimations concluded a cointegration relationship between gasoline demand, income, and gasoline price. The income elasticity found ranges from 0.10 to 0.29, while the price elasticity remains constant over time, being −0.15. Income elasticity increases over time, slightly decreasing close to the end of the period, which is specific for a developing country. In the short run, gasoline demand does not respond to the changes in income and price. The policy implications are discussed based on the findings of the study. Research results show that since the income elasticity of demand is not constant, the use of constant elasticities obtained in previous studies might be misleading for policymaking purposes. An increase in income elasticit...
Gasoline and Travel Demand Models Using Time Series and Cross-Section Data from United States
The price and income elasticities of highway gasoline and automobile travel demand are useful for forecasting gasoline tax revenues and highway investment needs and evaluating policies to reduce automobile use, improve fuel efficiency, or reduce greenhouse gas emissions. Gasoline and travel demand elasticities are calculated using 1950 to 1994 time series data for the United States and 1988 to 1992 pooled data for states of the United States. Gasoline demand was found to be price inelastic in the short run, but in the long run, it was found to be Ϫ0.7. Even in the United States, gasoline price has a significant impact on gasoline use. The response to price changes is divided among driving, fuel efficiency, and the size of the vehicle stock, although the latter is the smallest. The Corporate Average Fuel Economy (CAFE) program was found to be associated with an average 1 percent annual decline in per capita fuel consumption. The elasticity of driving with respect to fuel efficiencythe rebound effect-was found to be Ϫ0.3, confirming previous results. The state-level data produce inconclusive results; it is hypothesized that this is the result of the confounding effect of CAFE.
GASOLINE DEMAND IN THE OECD An Application of Pooling and Testing Procedures
This study utilizes a pooled inter-country data set, finding the long-run price-elasticity falls in the range-0.55 to-0.9, depending on the choice of pooled estimators. The estimators included the OLS, within-, and between-country estimators, plus five feasible GLS estimators. Even allowing for a ten-year distributed lag on price to reflect changes in auto-efficiency characteristics , the within-country estimator yields appreciably more inelastic estimates than did the OS estimator, which was heavily influenced by the between-or inter-country variation. This difference raises intriguing questions for future research.
Long-term fuel demand: Not only a matter of fuel price
2013
We estimate two models of motor fuel demand, one without and one with housing price. The model with housing price is more robust than the model with fuel price only. The housing price variable has a significant positive effect on fuel demand. Impact mechanism occurs through household location and spatial organization change. Combining spatial policy lowering housing price to carbon tax enhances fuel savings.