Factors Affecting Gas Price Inflation in the U.S. Over the Last Two Decades
Category
Business, Education and Humanities
Department
Data Science & Information System and Business Economics
Student Status
Undergraduate
Research Advisor
Heather Eckstein
Document Type
Event
Location
Meadowlark
Start Date
10-4-2025 9:30 AM
End Date
10-4-2025 9:50 AM
Description
Gasoline price inflation in the U.S. has been a persistent concern, influenced by crude oil prices, geopolitical events, regulatory policies, and financial market speculation. This study analyzes gasoline price fluctuations from 2004 to 2023, highlighting major disruptions such as the 2008 financial crisis and the COVID-19 pandemic. While traditionally considered inelastic, gasoline demand exhibits greater long-run elasticity, driven by shifts in driving behavior, fuel efficiency improvements, and electric vehicle (EV) adoption. Using time-series econometric models, this research examines key factors affecting price volatility. Short-run demand remains inelastic, but over time, sustained high prices encourage consumers to switch to fuel-efficient vehicles and alternative energy sources. Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models reveal that price volatility is amplified by speculative trading and global supply shocks. Government policies, such as fuel taxes, environmental regulations, and subsidies, further influence price dynamics.
Findings suggest that future gasoline consumption will decline due to technological advancements and regulatory shifts. Understanding these market forces is crucial for policymakers aiming to mitigate price volatility and transition toward sustainable energy solutions. This research provides valuable insights into the evolving nature of gasoline demand, offering strategies to balance economic stability with environmental sustainability.
Factors Affecting Gas Price Inflation in the U.S. Over the Last Two Decades
Meadowlark
Gasoline price inflation in the U.S. has been a persistent concern, influenced by crude oil prices, geopolitical events, regulatory policies, and financial market speculation. This study analyzes gasoline price fluctuations from 2004 to 2023, highlighting major disruptions such as the 2008 financial crisis and the COVID-19 pandemic. While traditionally considered inelastic, gasoline demand exhibits greater long-run elasticity, driven by shifts in driving behavior, fuel efficiency improvements, and electric vehicle (EV) adoption. Using time-series econometric models, this research examines key factors affecting price volatility. Short-run demand remains inelastic, but over time, sustained high prices encourage consumers to switch to fuel-efficient vehicles and alternative energy sources. Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models reveal that price volatility is amplified by speculative trading and global supply shocks. Government policies, such as fuel taxes, environmental regulations, and subsidies, further influence price dynamics.
Findings suggest that future gasoline consumption will decline due to technological advancements and regulatory shifts. Understanding these market forces is crucial for policymakers aiming to mitigate price volatility and transition toward sustainable energy solutions. This research provides valuable insights into the evolving nature of gasoline demand, offering strategies to balance economic stability with environmental sustainability.
