To reduce oil consumption, some say we should raise fuel-economy standards. Others say, no, let’s impose a gas tax — jacking up prices is the best way to reduce consumption.
The folks at the University of California Energy Institute have a new paper (PDF) that investigates the sensitivity of gasoline demand to changes in price, and concludes:
One implication of these findings is that gasoline taxes would need to be significantly larger today in order to achieve an equivalent reduction in gasoline consumption. This, coupled with the political difficulties in adopting gasoline taxes, suggests that policies and technologies designed to improve fuel economy are likely becoming relatively more attractive as a means to reduce fuel consumption.
Which is not to say it can’t be done — just that short-term demand response is relatively inelastic, and if you want to use so-called market forces, you have to serve a significant jolt to the system and wait a while for consumers to dig themselves out of their current purchase decisions in order to see results.
UCEI has a fine series of working papers on energy issues. You might consider signing up for their listserv.
