Effects of Federal policies on gasoline consumption

Utilizing theory and econometric evidence presented within, this paper provides rough quantitative estimates of the impacts on passenger car gasoline consumption of several Federal policies. Three distinct time periods are distinguished: pre-embargo, post-embargo but before new car efficiencies standards, and post-standards. In the pre-embargo period the net effect was to reduce gasoline consumption, while for four years after the embargo, policies tended to encourage consumption. The new car average fuel efficiency standards, first effective in 1978, can be expected to greatly influence passenger car gasoline consumption by forcing (possibly uneconomically large) increases in fleet efficiency. With these standards in operation, other policies will have little or no incremental effect on new car efficiency but can work only through influencing vehicle miles: the new car efficiency response to such programs will have been preempted by the standards. For the post-standards era, the net impact of Federal programs will be a reduction in gasoline consumption and a decrease in price elasticity of passenger car gasoline demand.