The Ministry has amended the Future Demand model, having considered peer reviewers’ comments about the low petrol price elasticity of -0.04. The Ministry commissioned Covec to re-estimate the light petrol vehicle kilometres travelled (VKT) model using different levels of price elasticity, and have accepted Covec’s recommendation. As a result, the Ministry has issued a second version of the model(external link) with a petrol price elasticity of -0.15. Please see the Covec report [PDF, 432 KB] for more details.
Users of the model and other Future Demand data should note the change in elasticity if comparing the results obtained from the original model to the modified model. Furthermore, please note that neither model takes off-road petrol use into consideration when calculating vehicle fuel use and fuel efficiency. Therefore, real fuel efficiency may be higher than what is shown in the model.
Comparison of Results between Modified and Original Models
The graphs below show the difference in the Future Demand scenario results using the original model and the modified model. In absolute terms, the modified model gives a greater increase in total VKT than the original model, because changes in Gross Domestic Product have a greater impact on VKT under the modified model. Total VKT is 26 percent higher in 2042 compared to 2014 under the modified model, whereas under the original model total VKT was only 18 percent higher.
As a result of the change to the model, the impact of the different scenarios varies depending on the importance of the energy price parameters. For example, the Travellers’ Paradise scenario assumes petrol prices will be 50 percent lower than the baseline scenario. Consequently, the modified model shows a greater increase in total VKT (50 percent over 2014) compared to the original model (35 percent). The change from the baseline however is less pronounced – 18 percent in the modified model compared to 15 percent in the original model.
In comparison, the Digital Decadence scenario shows a smaller percentage change in total VKT in 2042 compared to 2014 in the modified model, because the digital connectivity parameters have a much stronger influence on the amount of travel that people undertake in that scenario than the energy price parameter.
In the Co-operative and Close scenario, the digital connectivity was set at zero and the petrol price effect was set at a 500 per cent increase. Consequently, the change from the baseline is larger in the modified model than the original model. This scenario also shows the largest change between the models’ baseline results of all four scenarios as expected given it has the largest change in petrol prices.
The strength of the digital connectivity factors in the Global Locals scenario means the increase in petrol price elasticity has a relatively small impact on the total reduction in VKT. The change from the revised baseline is three percentage points greater, but the change from 2014 is the practically the same for both models.
Please note that these projections are based on the scenario parameters and are not intended to be forecasts.
- Read the Covec report [PDF, 432 KB] for more details.