Gas prices braking drivers

Citing a 100% increase in U.S. gasoline prices (to $3 per gallon) since 2003, the Congressional Budget Office (CBO) has published a study on gas price effects on driving and car sales. CBO analyzed data from California highways and sales of new and used vehicles from 2003 to 2006.

Among the findings:

• Freeway motorists are making fewer trips and driving more slowly
• Market share of light trucks (including SUVs and minivans) began to decline in 2004
• Used vehicle prices have shifted, with prices declining for larger models and rising for fuel-efficient cars

CBO notes two policy tools that encourage the use of more-fuel-efficient vehicles: the federal corporate average fuel economy (CAFE) standards and federal and state gasoline taxes.

Higher prices for gasoline affect both types of policies. By increasing the market demand for fuel-efficient vehicles, higher gasoline prices reduce the economic costs--to manufacturers and to consumers--of achieving stricter CAFE standards. Also, with higher gasoline prices, the average gasoline tax--or any given increase in that tax--is now a smaller share of the price of gasoline than it was in the past.

Effects of Gasoline Prices on Driving Behavior and Vehicle Markets (pdf, 58pp/828kb), January 2008