Understanding Links Between Transit Ridership and Gasoline Prices Evidence from the United States and Australia

Gasoline price increases have been cited as a major recent motivator for transit ridership growth. Research in 2007 established that for every 10% increase in gas prices, U.S. transit demand has increased by 1.2%, a cross-elasticity of demand to gas prices (e) of 0.12. Results also showed much higher effects on U.S. light rail systems (e = 0.27 to 0.38) for heavy rail (e = 0.17) but low sensitivity for bus (e = 0.04). In Australia, the impact of gas prices on ridership has been larger (e = 0.22) because of higher gas prices (20% to 30% higher than U.S. prices). Recent research demonstrates a significant impact on low-income travelers and links among increased gas prices, rising home-loan interest rates, and ridership growth. Australian research is summarized to establish the impact of both gasoline prices and home-loan interest rates on transit demand. The research disaggregates effects by individual transit mode (rail, bus rapid transit, and bus), service group, and time period to explore causal factors. The research relates Australian findings to the U.S. trends. Findings show that housing affordability is a critical influence on interest rate effects that may be relevant to the United States. Low values for e in U.S. bus systems may be explained by noncommute and low-income ridership features of U.S. bus systems. High values of e were found for high-quality transit, including Australian rail and bus rapid transit, which correlates with high values for U.S. rail. Longer-distance travel was also associated with ridership effects of higher gas prices.