Estimating the impact of the higher fuel tax on US gasoline consumption and policy implications

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Abstract
Based on US time series data, the impact of the newly passed 4.3 cents per gallon increase in the fuel tax on gasoline consumption was estimated. The regression with nominal values performs better than that with real values. For regressions with nominal values, tests show that the linear and logarithmic regressions are appropriate. Gasoline consumption varies positively with the GDP and negatively with its own price and the gasoline tax. The different values for the coefficients of the price received by retailers and the gasoline tax paid to the government suggest that these two variables should be separated and treated as two independent variables. The additional 4.3 cent gasoline tax is expected to reduce gasoline consumption by approximately 53.4 million barrels or 2.0% of total consumption annually.

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