{"id":7100,"date":"2014-12-17T13:21:39","date_gmt":"2014-12-17T18:21:39","guid":{"rendered":"https:\/\/www.myparkingsignblog.com\/blog\/?p=7100"},"modified":"2020-05-25T09:55:13","modified_gmt":"2020-05-25T13:55:13","slug":"eia-gas-prices-dont-affect-miles-traveled","status":"publish","type":"post","link":"https:\/\/www.myparkingsign.com/blog\/eia-gas-prices-dont-affect-miles-traveled\/","title":{"rendered":"EIA: Gas prices don’t affect miles traveled"},"content":{"rendered":"

The price of gas has little impact on how much people travel by car, reports<\/a> the U.S. Energy Information Administration, though Americans certainly seem to think it does. Gas is a \u201crelatively inelastic product,\u201d which means that price drops (or hikes) don\u2019t influence demand much. The EIA\u2019s report may run counter to commonly held logic, yet recent data will provide a compelling case: the average price of gas in the U.S. fell 28% from its average peak of $3.70 this year to $2.68 on December 8, but the EIA expects car travel to remain the static.<\/p>\n

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Gasoline cost $0.265\/gallon in 1966. Let that sink in a little bit. Image from the Orange County Archives.<\/a><\/p><\/div>\n

Americans themselves seem to think differently. A U.S. Travel Association<\/a> survey in 2012 found that the majority of those polled claimed they would change their car travel plans due to then-rising gas prices. As USA Today reported<\/a>, “54%, of leisure travelers who planned to travel by car say higher fuel prices would affect their plans. A smaller percentage, 26.8%, of business travelers would reconsider their plans.\u201d<\/p>\n

This holiday season, there are more predictions that falling gas prices will lead to higher car travel rates. As the Los Angeles Times reports<\/a>, AAA is expecting a 4% increase in the number of Americans traveling 50-plus miles from home during the season. And a GasBuddy.com survey suggests that gas prices will impact car trips, with nearly a quarter of the polled travelers claiming that cheaper gas will allow them to travel further. (The price drop will also allow them to buy more gifts (35%); spend more on food (11%), and upgrade their accommodations (8%).)<\/p>\n

As the EIA reports in its research, auto travel in the U.S. is not <\/em>very elastic, and it’s becoming even less so. (Check out graphs comparing regular gasoline price with U.S. vehicle miles traveled here<\/a>.) While the gas price elasticity is currently estimated \u201cin the range of -0.02 to -0.04 in the short term, meaning it takes a 25% to 50% decrease in the price of gasoline to raise automobile travel 1%.” But in the 1990s the price of gas was actually more <\/em>elastic. Back then, “it only took a 12% decrease in the price of gasoline to raise automobile travel by 1%.”<\/p>\n

Time and analysis will tell whether Americans traveled more this season as a result of the falling costs of car travel. But, in the meantime, as the EIA reports, there are other interesting factors that lead to the decrease in gas\u2019 price elasticity — beyond the price you pay at the pump. There is no absolute rule in determining how elastic a price is: factors like income, fuel efficiency, demographics and driver behavior, among others, all wield influence. But there are a few potential reasons for why gas price elasticity has dropped over the last few decades, including:<\/p>\n