Topic > Relationship between the price of gasoline and…

This study seeks to examine the relationship between the price of gasoline and the demand for larger, fuel-efficient vehicles, such as full SUVs and pickup trucks. Various industry specialists have studied the sharp decline in sales for US automakers; in particular, the large sales of SUVs over the past six years, and many analysts have attributed the changes to the corresponding increase in gasoline prices. Some studies show up to a 20% decline in market share for U.S. companies between 2002 and 2007. This type of decline equates to several billion dollars a year in lost profits. The studies reviewed below examined the price of gasoline and attempted to show the relationship between gasoline prices and consumer purchasing decisions regarding fuel efficiency, the type of vehicle purchased, and other sources that may influence the decision to purchase a pickup or SUV.Sarah E West (2007) examined the causes of new vehicle purchases from 1988 to 2000 by estimating the effect of previous years' gas prices on the decision to purchase a car, a truck, a van or SUV using consumer spending survey data from 1988 to 2000 and gasoline price data from the U.S. Energy Information Administration, its preliminary findings suggest that higher gas prices decrease the likelihood of purchasing vehicles that are not classified as cars, with a notable decrease in purchase probability occurring for vans, SUVs and trucks. A notable set of summary statistics shows that cars made up about 70 percent of new vehicle purchases, while trucks, SUVs, and vans accounted for about 13 percent, 9 percent, and 8 percent of the total, respectively, from 1988 to 2000. .Furthermore, the results indicate that previous year's gasoline price increases reduce...... half of the paper ......l Fuel Area. This data is used in the equation on an annual basis to compare other data entries and is obtained from the U.S. Energy Information Administration. INCOME deals with the buyer's annual household income, this data will be obtained through the Bureau of Labor Statistics - Consumer Expenditure Surveys or through the Consumer Price Index. Overall, previous studies have shown that there is a considerable relationship between gas prices and consumer demand for fuel efficiency. Almost all independent variables in the studies had statistical significance in the previous models. It is estimated that in this study all these factors will still play a significant role in the decision on which vehicle to purchase and will have significant correlation and relevance on which vehicles are most desired when fuel prices increase.