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TMIP Email List Technical Synthesis Series 2007-2010

Fuel Price Synthesis: Determining Current and Future Gas Prices

With the recent rise in gas prices, there is much debate over how to forecast future price changes. On the email list, this is a protracted issue with discussion going back as far as the inception of the Travel Model Improvement Program (TMIP) email list community. In November, 2001 an inquiry to the email list attempting to determine acceptable fuel cost ranges for a 2025 forecast scenario stimulated a discussion regarding changes to fuel prices and accounting for these changes within travel demand models (TDMs). Initially, many of the responses offered suggestions, methodologies and approaches for specifically forecasting fuel price and the subsequent influence on auto operating costs. The discussion has evolved through the years and has been expanded to include a number of considerations other than simply estimating future fuel costs. A significant amount of contributions have revolved around the potential changes, approaches and considerations that should be given to fuel price changes and the influences these may have on trip generation, trip distribution and mode choice models. A parallel discussion thread regarding model uncertainties, model sensitivities and elasticity's also surfaced.

The following synthesis represents discussions and contributions regarding potential methodologies and approaches to forecasting gas prices and represents a synthesis of all contributions to the email list community since its inception regarding this particular subject matter. This technical synthesis will be presented in three main categories: methodologies and approaches (current and future gas prices), issues and comments, and conclusions based on the composite of all contributions to the email list.

Methodologies and Approaches

Three methods for determining the current price of gas as well as numerous approaches to forecasting the price of gas were made to the email list in response to the initial inquiry into forecasting gas prices and auto operating costs. Below are highlights from the contributions to the email list for determining a current base year value as well as approaches to forecasting the cost of fuel:

Issues and Comments

Along with suggested methods or approaches, a number of contributors offered corresponding issues associated with determining the current and future price of gas. Some methods, such as using the internet or BLS data are self-explanatory. While other approaches, such as trending past gasoline prices to determine a current average price of gas as well as a future value(s), came with cautionary comments. Below are the highlights of the comments provided for certain approaches or methods:

Conclusions

A few of the email list comments conclude that it is generally recommended that each methodology and assumption be confirmed and agreed to during the planning process either through a technical working group or peer review committee. As one participant noted, developing a value based on the contributions of a technical working group or peer review committee doesn't necessarily contribute to better data but improves the understanding of the complexities involved in the issues being addressed and everyone understands how the value was generated. The general consensus is to assume the relative price of gas (as expressed in base year constant dollars) remains the same in the forecast. By doing so, the value can be defended, whereas forecasting the price of fuel is merely an exercise in speculation.

November 2007

Disclaimer

The objective of the series is to provide technical syntheses of current discussion topics generating significant interest on the TMIP e-mail list. Each synthesis is drawn from e-mails posted to the TMIP email list regarding a specific topic. The syntheses are intended to capture and organize worthwhile thoughts and discussions into one concise document. They do not represent the opinions of FHWA and do not constitute an endorsement, recommendation or specification by FHWA. These syntheses do not determine or advocate a policy decision/directive or make specific recommendations regarding future research initiatives. The syntheses are based solely on comments posted to the e-mail list.

Updated: 04/14/2014
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