Fuel Prices, New Vehicle Fuel Economy, and Implications for Attribute-Based Standards
An analysis of gasoline prices and US fuel economy standards reveals that price increases in the mid-2000s had a larger effect on vehicle market shares than recent decreases, but the latter have slightly reduced the mandated level of fuel economy.
- Recent gasoline price decreases have had a significant effect on new vehicle fuel economy, although a smaller effect than gasoline price increases in the mid-2000s.
- The recent gasoline price decreases have reduced by a small amount the overall level of fuel economy required by federal standards.
- Vehicle sales appear to be more responsive to rising than to falling or stable prices.
- There is limited evidence that fuel economy standards have weakened the relationship between gasoline prices and new vehicle fuel economy.
Josh Linn is a senior fellow at RFF. His research centers on the effects of environmental policies and economic incentives for new technologies in the transportation, electricity, and industrial sectors.
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