Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand

By Jonathan E. Hughes, Christopher R. Knittel, Daniel Sperling. 2006

655 citations recorded by the source corpus.

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. The short-run price and income elasticities of gasoline demand in the United States during the 1970s and 1980s have been studied extensively. However, 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. 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.

View Paper: https://www.semanticscholar.org/paper/0c97dd97cbbe5d5b095bf138fde6a599e99956ec

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Citations in the corpus

The Rebound Effect and Energy Efficiency Policy (2016, unknown): “9 Hughes et al. (2008) U.”
Are Consumers Myopic? Evidence from New and Used Car Purchases (2013, unknown): “Donna investigates how public transportation utilization is affected by gasoline prices, Goldberg estimates the effect of gasoline prices on vehicle miles travelled, and Hughes et al. investigate monthly gasoline consumption. At the other extreme, in the long run, automobile manufacturers can change”
Validating Energy-Oriented CGE Models (2009, unknown): “Whenmultiple sources of household response elasticities are given in the literature, the lower bound of the literature estimates is used here, as supported by the work of Hughes et al. (2006) who shows that the price elasticity of demand for gasoline is becoming more inelastic.”
Identifying the elasticity of driving: Evidence from a gasoline price shock in California (2014, unknown): “Economists have long been convinced that this is the case, but recent work by Small and Van Dender (2007) and Hughes et al. (2008) called this intuition into question.”
The Incidence of U.S. Climate Policy: Alternative Uses of Revenues from a Cap-and-Trade Auction (2009, unknown): “10 Hughes et al. (2008)”
THE ROLE OF INVENTORIES AND SPECULATIVE TRADING IN THE GLOBAL MARKET FOR CRUDE OIL (2014, unknown): “For example, Hughes et al. (2008) report an average elasticity estimate of 0.”
Anticipation, Tax Avoidance, and the Price Elasticity of Gasoline Demand (2015, unknown): “More recent contributions include Hughes et al. (2008), Li et al. (2014), Levin, Lewis and Wolak (2014), and Tiezzi and Verde (2014).”
Estimating the effect of a gasoline tax on carbon emissions (2011, unknown): “As a point of comparison, Hughes, Knittel, and Sperling (2008) using a level specification and similar data for 2001-2006 find a price elasticity of -0.04 which is not much different from our estimate after accounting for sampling uncertainty.”
The Economic Effects of Energy Price Shocks (2007, unknown): “9Recently, Hughes, Knittel, and Sperling (2007) have reported a sharp decline in the elasticity of gasoline demand when comparing estimates for 1975-1980 and for 2001-2006.”
Gasoline Taxes and Consumer Behavior (2014, unknown): “[15] J.”