Survey_DK_2011

Abstract

Figure 1 describes national gasoline prices, consumption, and taxes over the period 1989–2008 from the US Department of Energy and US Department of Transportation. The data are monthly. Gasoline prices and taxes have been deflated using the US consumer price index. Our sample period covers January 1989 through March 2008. We focus on this period because a continuous time series of gasoline consumption by state is not available prior to 1989. Moreover, recent evidence from Hughes et al. (2008) indicates that gasoline price elasticities have declined since the mid 1980s, making the 1990s and 2000s the most relevant period for understanding current demand behavior. Both the price and quantity time series exhibit a clear seasonal pattern. Real prices fluctuate between $1.50 and $2.00 between 1989 and 2004 before increasing to $3.00 and above in 2005.8 Gasoline consumption increases steadily during the 1990s and then appears to level off after 2005.9 Tax per gallon increases with federal tax increases at the end of 1990 and in 1993, and then steadily erodes in real terms.