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  • Essay / Relationship between the price of gasoline and...

    This study aims to examine the relationship between the price of gasoline and the demand for larger, less fuel-efficient vehicles, such as full-size SUVs and vans. Various industry experts have studied the sharp decline in sales of American automakers; in particular, strong sales of SUVs over the past six years and many analysts have attributed these changes to the corresponding rise in gasoline prices. Some studies show a decline of up to 20 percent in the market share of American companies between 2002 and 2007. This type of decline represents several billion dollars per 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, type of vehicle purchased, and other sources that could influence the decision to purchase a pickup truck or sport utility vehicle. Sarah E West (2007) examined the causes of new vehicle purchases from 1988 to 2000 by estimating the effect of gasoline prices from previous years on the choice to purchase a car, truck, van, or SUV using data from Consumer Expenditure Surveys from 1988 to 2000 and According to gasoline price data from the United States Energy Information Administration, its preliminary results suggest that higher gasoline prices The likelihood of purchasing vehicles that are not classified as cars decreases, with a significant decrease in the likelihood of purchase for vans, SUVs and trucks. A remarkable set of summary statistics shows that cars accounted for 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, between 1988 and 2000. Additionally, results indicate that gasoline price increases from the previous year reduced...... middle of paper ......l Fuel Zone. This data is used in the equation on an annual basis to match other data inputs, and it is obtained from the United States Energy Information Administration. INCOME relates to the buyer's annual household income. This data will be obtained either through the Bureau of Labor Statistics - Consumer Expenditure Surveys or through the Consumer Price Index. Overall, prior knowledge has shown that there is a considerable relationship between gas prices. and consumer demand for energy efficiency. Almost all independent study variables had statistical significance in the previous models. It is estimated that in this study, all these factors will again play an important role in the vehicle purchase decision and will have significant correlation and relevance as to which vehicles are most sought after when fuel prices increase..