Assessing the Impact of Lower gas prices in Alterative Fuel Vehicles and the Consumption of Alternative Fuels

westernized nations including the United States, the elasticity of demand for

these fuels has been more dictated by the pricing decisions of OPEC over pure

market forces. With the turbulent pricing of gasoline on a global basis throughout

the 21rst century, the traditional interrelationships between demand and pricing

have become completely disengaged from each other. There is in fact no clear

definition of elasticity of demand for fuels, as the effects of oil futures trading,

OPEC pricing models and decisions, the inclusionary versus exclusionary

strategies of OPEC with regard to their lesser capitalized members, and the

continuing political turmoil of the Middle East only serve to exacerbate the

The response to this high level of uncertainty as at the one end of the spectrum

to create highly intricate forecasting and prediction models including the

Generalized Autoregressive Conditional Heteroskedascity (GARCH) Model

(Zhang, Lohr, Escalante, Wetzstein, 2008) which seeks to normalize and lessen

the shock on economic systems based on wide pricing fluctuations in the cost of

petroleum-based fuels. The magnitude of

based vehicles will begin to dominate the global auto industry. Alternative fuel

OPEC will diminish as the supply chains of those first movers with alterative fuel-

predict demand for petroleum products (Zhang, Lohr, Escalante, Wetzstein,

pricing being so capricious in nature, a rise or fall in oil production could actually

dependency of their business models on petroleum-based fuels is matched by

Devising models to explain the wide variation in fuel prices still does not alleviate

approximately 70% of the U.S. petroleum demand (Zhang, Lohr, Escalante,

Some topics in this essay:
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