Measuring the Long-Run Fuel Demand of Cars

Abstract

Long-run fuel demand for cars is estimated by estimating separately total vehicle stock, mean fuel intensity, and mean annual driving distance, based on a new data set consisting of 12 OECD countries from 1973 to 1992. A large part of the estimated long-run fuel price elasticity arises from changes in mean fuel intensity, while the long-run income elasticity arises largely from changes in the number of cars. The effects of changed taxes on car ownership and use are significant, but smaller than from a change in fuel tax.