> Based on the simulation results, we estimate that a 10 percent increase in gasoline prices will generate a 0.22 percent increase in fleet fuel economy in the short run (one year)
> We also find that sustained $4.00 per gallon gasoline prices will generate a 14 percent long-run increase in fleet fuel economy relative to 2005 levels, although this prediction should be interpreted cautiously in
light of the relatively large out-of-sample price change considered and the Lucas critique (Robert E. Lucas, Jr. 1976)
The strength of the effect of oil prices on fleet efficiency is 0.0022 over a year. I would consider that extremely incremental. Meanwhile, we observe a 22% decrease in total car sales over the 2007-2009 period due to changes in disposable income and household wealth. [1]
So I would still argue that gas prices change the fleet efficiency mix around the margin, but that purchasing decisions are driven primarily by changes in income, government policy, and social norms.
> We also find that sustained $4.00 per gallon gasoline prices will generate a 14 percent long-run increase in fleet fuel economy relative to 2005 levels, although this prediction should be interpreted cautiously in light of the relatively large out-of-sample price change considered and the Lucas critique (Robert E. Lucas, Jr. 1976)
The strength of the effect of oil prices on fleet efficiency is 0.0022 over a year. I would consider that extremely incremental. Meanwhile, we observe a 22% decrease in total car sales over the 2007-2009 period due to changes in disposable income and household wealth. [1]
So I would still argue that gas prices change the fleet efficiency mix around the margin, but that purchasing decisions are driven primarily by changes in income, government policy, and social norms.
[1] http://www.federalreserve.gov/econresdata/feds/2014/files/20...