Gas Prices, Cars, Trucks, and Hybrids
Wednesday, April 16th, 2008I just finished my term project for my environmental economics class. I started out looking for a relationship between recent gas prices and hybrid sales. What I found was interesting. Check out the graphs below (click on them for a clearer picture).
You see that gas prices have a lot of seasonal fluctuation. I was only interested in the overall trend, so I applied what we call a “weighted moving average smoother” to the data–basically it just takes out the “noise” and leaves the overall trend (I used this smoother on all the graphs below). Here is what is looks Like:
Because nominal prices tell us nothing about the real cost of gas (doesn’t account for the changing value of the dollar or the level of wealth we enjoy), I also collected GDP data:
Using nominal gas price and GDP data, I created a relative gas price (gas price/GDP). It is interpreted as the cost of gas relative to our level of wealth:
Notice the relative cost of gas was falling all through the 1990s and for the most part increasing throughout the current decade. Now look at the ratio between car and truck sales in the U.S. during the same time period:
In 1990 there were about two cars sold for every truck. That ratio continuously fell until it finally bottomed out in late 2004 when there were more trucks being sold than cars (relative gas prices had already been increasing for 2-5 years).
Now look at the number of hybrids sold as a percentage of total vehicle sales:
Notice that hybrids took a sharp turn around the same time the car-truck trend switched directions.
My data does not allow me to control for consumer tastes and preferences or countless other factors that contribute to these trends. That aside, it appears that consumers react to shifts in relative gas price trends with about a 2-5 year lag (at least in terms of the type of vehicles we purchase).
In hind sight, I wish I had collected data for a larger time period. It would be helpful to see other shifts in relative gas prices (think 1970’s gas crisis). Did consumers react similarly? Was the lag in their reaction similar?
I collected GDP and U.S. automotive sales data from the Bureau of Economic Analysis. Gas price data came from the Energy Information Administration. And hybrid sales data came from Green Car Congress.