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Chapter 3 | Scenario differences and model details
CARMOD then calculates the vehicle fleet stock dynamics over the projection
period, and derives the necessary level of new vehicle sales to meet this projected
(equilibrium) level of Australian motorisation and thus the resulting fleet fuel
efficiency, using the projected fuel intensities (L/100 km) of the new cars (from the
technology subcomponent of the model).
Though the estimation process is dependent on the chosen elasticity values within
the models, the final utilisation trends derived by this formulation are not highly
sensitive to variations in those elasticity values, since car travel is relatively inelastic.
Also, the logistic curve for per capita car travel exhibits slowing growth over the
projection period and is quite flat after about 2015— meaning that projected values
for car use beyond that point show diminishing response to income increases, and
growth in total car VKT becomes progressively closer to population growth rates.
Transport demand tends to be fairly inelastic with respect to fuel prices. Even though
the cost of fuel is an important contribution to overall transport costs, it tends to
be overshadowed by other effects. The total generalised cost of motoring is a
combination of the value of in-vehicle travel time, trip fuel costs, other operating
costs (such as depreciation and maintenance), parking fees and tolls and network
access charges (such as vehicle registration) of which fuel prices tend to comprise
only a small proportion of the total.
Even though recent high oil prices have served to slightly dampen some elements
of transport demand, they do not appear to have made a large impact on aggregate
Australian transport emissions (with total domestic transport emissions still rising
during 2006, a year with rapid fuel price rises). The recent prices do appear to have
been high enough to cause a temporary pause in the growth of total private vehicle
travel, with sales of automotive gasoline (petrol) actually falling slightly during the
2006 financial year. However, during the early stages of 2007, petrol sales roughly
returned to trend growth rates (until further oil price rises and the economic
slowdown during 2008, subsequent to the preparation of these projections, lead to
another pause in fuel sales growth).
Higher petrol prices also seem to have influenced recent vehicle purchase patterns
by Australian motorists, with new sales of large passenger cars down by nearly 20
per cent in 2006 (i.e. new large sedan sales, with new 4WD ‘All Terrain Wagon’ sales
only decreasing slightly in 2006, and remaining close to 23 per cent of total passenger
vehicle sales). Sales of small passenger cars and (highly fuel efficient) petrol-electric
hybrid motor vehicles have been growing strongly—also probably influenced by the
high fuel prices—with new small car sales increasing by about 20 per cent in 2006,
and new hybrid vehicle sales roughly quadrupling over the last three years.
The short-term, or immediate, price elasticity of fuel demand appears to be in the
range of about −0.1 to −0.3 for passenger vehicles (with a median value of about
−0.16). The literature normally quotes values of between about −0.3 to −1.0 for long
run petrol price elasticities (median value about −0.45), with the longer term values
generally being higher than the short term, as certain behavioural effects (such as
motorists’ purchase choices moving to more fuel efficient vehicles) have time to
impact on total fuel use.
Regarding the issue of whether the price responsiveness of fuel use may have altered
in recent times (e.g. due to the sharpness of the 2005 and 2006 petrol price rises),
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