Study Finds Drivers Value Fuel Efficiency More with Uncertain Oil Costs
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When gas prices are unpredictable, car buyers are willing to pay more for vehicles that use less fuel, according to new research from the University of Maryland.
The study challenges the long-held view that consumers are “short-sighted” about fuel economy (meaning they focus on current conditions and not the long-term benefits) when purchasing a vehicle. The new work has important implications for policies around fuel efficiency. The work was published on February 12, 2026, in the Journal of the Association of Environmental and Resource Economists.
Assistant Professor James Archsmith and PhD candidate Simon Levin from the Department of Agricultural and Resource Economics used financial market data to measure uncertainty in future gas prices and linked it to car-buying patterns across the U.S to analyze how changes in both fuel prices and their volatility affected consumer choices. They found that car buyers’ willingness to pay (WTP) for better fuel economy increases by about 7% when price volatility rises. In addition, 16% of their willingness to pay is directly tied to the desire to avoid risk.
“Our results show that consumers aren’t necessarily ignoring future fuel costs — they’re responding rationally to uncertainty,” said Archsmith. “This work adds a new dimension to understanding how people make vehicle choices and offers insights for designing climate and energy policies that reduce both emissions and economic risk.”
Traditionally, economists have been puzzled by the consistent pattern of “myopia” shown by consumers when it comes to purchasing vehicles. Previous studies have shown that consumers are willing to pay less for fuel economy improvements than the savings those improvements would likely generate over time. This study shows that part of this apparent undervaluation of fuel economy could result from previous study models ignoring consumers’ sensitivity to future fuel price uncertainty.
The findings suggest that policies promoting more predictable fuel or carbon prices could help car buyers more confidently choose a vehicle that fits their driving needs. Conversely, policies that make future prices less predictable — such as certain cap-and-trade systems — might unintentionally raise costs for consumers, even if they improve fuel efficiency overall.
[Sections of this release were written with the assistance of artificial intelligence, with oversight from a human writer/editor]
