Simulating the consumption of gasoline

Abstract

This study used econometric models to estimate the parameters of gasoline demand. The first model re lates gasoline consumption directly to income and price variables. The second model takes account of the market split between small and large cars, as well as the fuel-efficiency rating for each car type. Gasoline consumption is indirectly estimated through the relationship of vehicle miles traveled and price of gasoline and income. Both models allow for be havioral changes over time so that long-term response is greater than short-term response.

Both models were fitted to Minnesota data and used to simulate future consumption under alternative price, income, and fuel efficiency scenarios. The effects of income level dominate the effects of price level in both models. Consequently, changes in real income level are important for forecasting future energy demands for automobiles in the state.