Rising fuel price has no vital role in increasing fuel economy vehicle sales

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JEDDAH — A new KAPSARC’s study revealed that the rising fuel price doesn’t play a vital role in increasing fuel economy vehicle sales. However, the historical aggregate US sales data from 1972 to 1990, the recently proposed CPPV framework estimated that a 1% increase in the average price of fuel would have resulted in only a 0.041% increase in new vehicle fleet fuel economy.

The study pointed out that the policymakers have to align the policy of fuel price demand-side with additional policy instruments, such as the supply-side fuel economy standards, to improve the sales of fleet fuel efficiency cars.

KAPSARC’s study sheds light that the total new vehicle sales in Saudi Arabia declined by about 20% in 2016 due to the increase in domestic gasoline prices as the Kingdom’s new-vehicle buyers’ estimated elasticity remained almost constant from 2013 to 2015, at just over 0.08, before decreasing to 0.067 in 2016.

“An Alternative Framework for Measuring New Vehicle Buyers’ Responsiveness to Changes in Fuel Prices” commentary used the CPPV framework to estimate the responsiveness of new light-duty vehicle (LDV) buyers to changes in fuel prices in the Kingdom of Saudi Arabia

The results showed that a difference in the fuel price of about 21% (equivalent to the average change observed between 1972-1990) would have contributed to only around a 1% improvement in fleet fuel economy. While the inputs of supply-side countervailing measures, fuel economy standards, and higher oil prices lead to an increase in the sales of LDV cars by 28% during the same period.

Additionally, the new vehicle fleet fuel economy decreased in the US following the fuel price increases from 1973-1975 as the lower-income consumers might have responded to the 1973-1975 rise in fuel prices by not purchasing new cars.

The number of LDV models sold in the US increased from a low of 72 in 1974 to a high of 150 in 1988. In real terms, the sales-weighted average price increased by almost 50% during the 1980s after having been virtually constant during the 1970s. Fleet fuel economy grew from 1975 as a result of the introduction of the US CAFE standards enacted by Congress in 1975.

According to GlobalData, light vehicle sales in 2019 was 89.8 million cars globally from 94.3 million in 2018. This number was 4.8 percent down and the lowest since 2015.

The King Abdullah Petroleum Studies and Research Center (KAPSARC) is a non-profit global institution dedicated to independent research into energy economics, policy, technology, and the environment across all types of energy.

The study pointed out that the policymakers have to align the policy of fuel price demand-side with additional policy instruments, such as the supply-side fuel economy standards, to improve the sales of fleet fuel efficiency cars.

KAPSARC’s study sheds light that the total new vehicle sales in Saudi Arabia declined by about 20% in 2016 due to the increase in domestic gasoline prices as the Kingdom’s new-vehicle buyers’ estimated elasticity remained almost constant from 2013 to 2015, at just over 0.08, before decreasing to 0.067 in 2016.

“An Alternative Framework for Measuring New Vehicle Buyers’ Responsiveness to Changes in Fuel Prices” commentary used the CPPV framework to estimate the responsiveness of new light-duty vehicle (LDV) buyers to changes in fuel prices in the Kingdom of Saudi Arabia

The results showed that a difference in the fuel price of about 21% (equivalent to the average change observed between 1972-1990) would have contributed to only around a 1% improvement in fleet fuel economy. While the inputs of supply-side countervailing measures, fuel economy standards, and higher oil prices lead to an increase in the sales of LDV cars by 28% during the same period.

Additionally, the new vehicle fleet fuel economy decreased in the US following the fuel price increases from 1973-1975 as the lower-income consumers might have responded to the 1973-1975 rise in fuel prices by not purchasing new cars.

The number of LDV models sold in the US increased from a low of 72 in 1974 to a high of 150 in 1988. In real terms, the sales-weighted average price increased by almost 50% during the 1980s after having been virtually constant during the 1970s. Fleet fuel economy grew from 1975 as a result of the introduction of the US CAFE standards enacted by Congress in 1975.

According to GlobalData, light vehicle sales in 2019 was 89.8 million cars globally from 94.3 million in 2018. This number was 4.8 percent down and the lowest since 2015.

The King Abdullah Petroleum Studies and Research Center is a non-profit global institution dedicated to independent research into energy economics, policy, technology, and the environment across all types of energy. — SG


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