Done Fuming Over High Gas Costs: Do Low Gas Prices Increase Automobile Purchases?

Student Author(s)

Maxwell Kaiser

Faculty Mentor(s)

Dr. Sarah Estelle

Document Type


Event Date



Recently, the United States has experienced the lowest gasoline prices per gallon in over a decade due to new technologies such as fracking and the opening of several oil reserves. These new, low gas prices allow households to experience false positive savings because the gasoline financial burden is lessened. This paper studies the effect on consumer demand for cars while paying specific attention to the effects of gasoline prices on automobile purchases. The data consists of nationwide, state level of monthly gasoline prices, gross state product, and car sales between 2005 and 2016. Evidence shows, historically, that the price of gasoline has impacted the way that automobiles are purchased. In times of high gas prices, consumers demand highly fuel-efficient vehicles as opposed to large passenger vehicles or gas-guzzlers. This paper aims to show the impact of all-time low gas prices on the market as a whole and whether an increase in automobile sales is experienced.

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