Elasticity

NBER research on the elasticity of fleet fuel economy to oil prices.

The authors estimate that a 10 percent increase in gasoline prices from 2005 levels will generate a 0.22 percent increase in fleet fuel economy in the short run and a 2.04 percent increase in the long run - ten times the short-run effect. The $4 per gallon gasoline prices observed in early 2008 could result in a sizable increase in fleet fuel economy - that is, an increase in average fleet miles per gallon, or MPG - of 3.27, or 14 percent, relative to 2005. There also would be a large accompanying reduction in gasoline consumption if these high prices were to remain permanent