Falling Gas Prices Unlikely to Boost Demand for Car Travel
Falling gasoline prices won’t have much impact on demand for car travel, the U.S. Energy Information Administration reported Monday.
Average U.S. gas prices dropped 28% between June 23 and December 8, the EIA noted. But in contrast to air travel, which tends to decrease with rising fuel costs, “this price decline may not have much effect on automobile travel, and in turn, gasoline consumption. Gasoline is a relatively inelastic product, meaning changes in prices have little influence on demand.”
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At least in the short term, the EIA estimated it would take a 25-50% reduction in gasoline prices to increase travel demand by 1%. “Demand can change for reasons beyond changes in fuel price, including changes in other economic factors (eg. income), demographics, driver behaviour, vehicle fuel efficiency, and other structural factors.”