Transportation sector: possibilities for substitution and elasticity of demand in mineral oil consumption
On 11 July 2011, Max Grünig, Fellow at the Ecologic Institute, delivered a presentation on the transportation sector: possibilities for substitution and elasticity of demand in mineral oil consumption at the German Institute for International and Security Affairs (SWP).
This presentation was delivered in the context of a workshop at the SWP in Berlin on the topic of "The global oil market - Status Quo and future challenges". Max Grünig pointed out that mineral oil is and will remain for the time being the main source of energy for the transport sector.
There is little price elasticity in motorised passenger transport, which is however variable depending on the goal of a trip. For the transport of goods, depending on the substitute, there is more elasticity. All things considered, transport remains relatively cheap today and substitutes are very complex and limited (other modes of transportation, efficient vehicles, avoidance of trips, alternative fuels).
It follows that even with further price increases for gasoline and diesel fuel, both passenger and freight transport will rely mostly on mineral oil.