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Old 2008-07-20
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Exclamation How Do Gasoline Prices Affect Driving Behavior?

NMA Article: How Do Gasoline Prices Affect Driving Behavior?


In January 2008, the Congressional Budget Office put out a study examining the effects of gasoline prices on driving behavior.  While the CBO’s analysis is somewhat dated — it’s based on four years of data collected from metropolitan freeways in California between 2003 and 2006 — the findings likely extend to current gas prices as well.

We’ve excerpted some sections of the report below and encourage you to read the full report if you have the time and inclination.

Selected Excerpts:

  • “Recent empirical research suggests that total driving, or vehicle miles traveled (VMT), is not currently very responsive to the price of gasoline. A 10 percent increase in gasoline prices is estimated to reduce VMT by as little as 0.2 percent to 0.3 percent in the short run and by 1.1 percent to 1.5 percent eventually.1

  • “[b]ecause recent research indicates that VMT is relatively insensitive to gasoline prices, the higher prices of the past several years should not be expected to cause large changes in freeway traffic volume.”

  • “On average, over all locations, the price of gasoline in a given week had a negligible effect on the volume of weekend traffic, but on weekdays, higher gasoline prices had a small but statistically significant effect (see Table 1-1).”

  • “The value of the potential fuel savings from slowing down is rather small compared with reasonable measures of many motorists’ value of time, so the likely effect of gasoline prices on highway speeds also should be rather small.”

  • “The development of freeway congestion-pricing projects—which charge tolls that rise with the amount of traffic congestion—has enabled researchers to estimate motorists’ value of time during congested commuting hours. Estimates for California’s high-occupancy toll lanes along State Route 91, west of Riverside, and Interstate 15, north of San Diego, indicate, on the basis of tolls and travel time savings in toll lanes versus free lanes, that motorists value their time between $20 and $45 per hour of reduced travel time.9

  • “If the speeds at which motorists drive are positively correlated with how much they value their time, then a disproportionate number of slower-driving motorists would have lower-than-average values of time and faster-driving motorists would have higher values. If that is the case, then the findings of the Congressional Budget Office (CBO) about the effects of the price of gasoline on highway speeds are consistent with the prediction that motorists with lower values of time will be more responsive to an increase in gasoline prices than will drivers with higher values of time.”

  • “Higher gasoline prices from 2003 through the end of 2006 caused many motorists to drive a little more slowly on uncongested highways. Median speeds in free-flow conditions declined slightly as gasoline prices increased. The slowdown was more pronounced for vehicles moving at the somewhat lower 5th percentile speeds; there was no discernible effect on 95th percentile speeds. The median effect is consistent with recent estimates of gasoline price elasticity, which indicate that short-run demand declines by around 0.6 percent when the price rises by 10 percent, all else being equal.19

There is a substantial amount of additional material in the full report including the effect that gas prices have on the vehicle market. Check it out when you get a chance.

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How Do Gasoline Prices Affect Driving Behavior?

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