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Impact of fuel price on vehicle miles traveled (VMT): do the poor respond in the same way as the rich?

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Abstract

The effects of fuel price on travel demand for different income groups reveal the choices and constraints they are faced with. The first purpose of this study is to understand these underlying choices and constraints by examining the variation of fuel price elasticity of vehicle miles travelled (VMT) across income groups. On the other hand, the rebound effect—increase in VMT as a result of improvement in fuel efficiency may offset the negative effect of fuel price on VMT. The second purpose of this study is to compare the relative magnitudes of the fuel price elasticity of VMT and the rebound effect. A system of structural equations with VMT and fuel efficiency (MPG, miles per gallon) as endogenous variables is estimated for households at different income levels from 2009 National Household Travel Survey. Higher income households show greater fuel price elasticity than lower income households. Fuel price elasticities are found to be −0.41 and −0.35 for the two highest income groups, while an elasticity of −0.24 for the lowest income group is identified. The rebound effect is found to be only significant for the lowest income households as 0.7. These findings suggest the potential ability of using fuel price as a tool to affect VMT. The study results also suggest possible negative consequences faced by lower income households given an increase in fuel price and call for more studies in this area.

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Notes

  1. We were aware of the possible inaccuracy in self-reported figures. To ensure the quality of self-reported VMT used, we only used the self-reported VMT of those households with a ratio between self-reported VMT and the estimated VMT ranging from 0.25 to 4 or with the difference between self-reported VMT and estimated VMT less than 10,000 (this criteria is used by Oak Ridge National Laboratory in identifying outliers of self-reported VMT). Otherwise, VMT used was the estimated VMT. Households with the estimated VMT only account for 5 % of the households in our sample.

  2. In 2009 NHTS, trip purposes of maintenance trips are following: Day care, Medical/dental services, Shopping/errands, Buy goods: groceries/clothing/hardware store, Buy services: video rentals/dry cleaner/post office/car service/bank, Buy gas, Family personal business/obligations, Use professional services: attorney/accountant, Attend funeral/wedding, Use personal services: grooming/haircut/nails, Pet care: walk the dog/vet visits, Attend meeting: PTA/home owners association/local government, Transport someone, Pick up someone, Take and wait, Drop someone off, Meals, Get/eat meal.

  3. In 2009 NHTS, trip purposes of discretionary trips are following: Social/recreational, Go to gym/exercise/play sports, Rest or relaxation/vacation, Visit friends/relatives, Go out/hang out: entertainment/theater/sports event/go to bar, Visit public place: historical site/museum/park/library, Social event, Coffee/ice cream/snacks.

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Authors and Affiliations

  1. University of Washington, Wilcox Hall 261, Seattle, WA, 98195, USA

    Tingting Wang

  2. University of Washington, More Hall 133A, Seattle, WA, 98195, USA

    Cynthia Chen

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  1. Tingting Wang
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  2. Cynthia Chen
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Correspondence to Tingting Wang.

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Wang, T., Chen, C. Impact of fuel price on vehicle miles traveled (VMT): do the poor respond in the same way as the rich?. Transportation 41, 91–105 (2014). https://doi.org/10.1007/s11116-013-9478-1

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