Économie et Statistique n° 446 Urban Fragmentation and Economic Shocks - Petrol Consumption - Assessing the Impact of Sudden Business Closures on Wage Trajectories
Petrol Consumption: Short- and Long-Term Price Effects by Population Category
Our article analyzes the relationship between petrol prices and household expenditures on petrol using data from INSEE's Family Budget Survey. In the short run, on cross-sectional individual data, we estimate the price elasticity of fuel between -0.25 and -0.35, with wide differentials by living standards. The most affluent households do not respond significantly to petrol prices, unlike modest households. To estimate long-term price elasticities, we had to construct survey pseudo-panels from 1985 to 2006. We found values ranging from -0.6 to -0.7. For the most modest households, the values lie between -0.7 and -0.8. Their elasticity slightly exceeds that of the most affluent households (between -0.6 and -0.7), whose demand is more inelastic to fuel prices. Rural households display a lower elasticity (between -0.7 and -0.8) than urban households (between -0.8 and -0.9). These results indicate that not all households can adjust their consumption significantly in step with short-term price fluctuations. By contrast, long-term adjustment capacities are high for all sub-populations examined-on condition that the changes in consumption consecutive to price changes observed in the past can be reproduced.