CBO released a study today on consumers responses to the substantial upward trend in gasoline prices that began in 2003.
Many drivers have responded to higher gasoline prices in the way that they drive, but overall the response has been very small.
The study notes that the response of consumers to higher gasoline prices has important implications for policies that affect gasoline consumption, including CAFE (Corporate Average Fuel Economy) standards for cars and light trucks. Because higher gasoline prices increase the demand for vehicles with better fuel economy ratings, they reduce the economic costs (and fuel savings) of adopting more-stringent CAFE standards. At the same time, to the extent stricter CAFE standards improve fuel efficiency beyond what consumers would choose in the absence of such standards, they reduce the per-mile costs of driving -- which would partially reverse some of the effects of higher gasoline prices discussed in this study. The federal tax on gasoline, by contrast, reinforces rather than neutralizes the behavioral and vehicle choice effects of higher gasoline prices. It also immediately affects all motorists incentives to reduce gasoline consumption, whereas CAFE standards primarily affect motorists only after they replace the vehicles they were driving at the time the standards were implemented.
David Austin, an economist in CBOs Microeconomic Studies Division, wrote the report. In addition to his work on gas prices and CAFE, David has done research in the areas of liability policy and toxic emissions; Clean Air Act regulations; consumer benefits of new technologies; and allocation of emissions controls, and research and development in the pharmaceutical industry. He has been at CBO for six years; prior to that was at Resources for the Future for eight years. He received his undergraduate degree from Stanford University and his economics Ph.D. from UC Berkeley. He also has a masters degree in statistics from Yale University. And he has an impressive track-and-field record, including a mile best of 4:19.