Fact #507: February 25, 2008
The Short-Run Price Elasticity of Gasoline Demand Declined Over the Past Several Decades
In a paper presented at the 2007 Transportation Research Board meeting, authors from UC Davis showed that the short-run price elasticity of gasoline demand with respect to the price of gasoline declined from a range of -0.21 to -0.22 in 1975-1980 to a range of -0.034 to -0.077 in 2001-2006.
This means that doubling in the price of gasoline in the earlier period would result in a 21% to 22% decline in the amount of gasoline use, but doubling the price of gasoline in the more recent period would result in only a 3.4% to 7.7% reduction in gasoline use. This paper won the Transportation Research Board (TRB) Barry McNutt Award in 2008 for the best energy policy paper presented at the 2007 annual TRB meeting.
|1975-1980||21 - 22%|
|2001-2006||3.4 - 7.7%|
Source: Jonathan E. Hughes, Christopher R. Knittel, and Daniel Sperling, University of California, Davis, "Evidence of a Shift in the Short-Run Price Elasticity of Gasoline Demand," Working Paper 12530 (PDF 126 KB). (Download Adobe Reader)