The Relationship between Oil Price and Income on Transportation Demand

Fluctuations in global oil prices and variations in consumer income significantly influence transportation demand, posing challenges for policymakers, businesses, and households. This study examines the dynamic relationship between oil price, income, and transportation demand to address the gap in understanding how these variables interact in both short- and long-term contexts. The purpose is to determine the extent to which changes in oil price and income levels affect transportation demand patterns. Employing a time-series econometric approach, specifically a Vector Autoregression (VAR) model with data spanning 2000–2024, the analysis reveals that rising oil prices reduce transportation demand, while increasing income exerts a positive effect. Findings indicate asymmetric responses to oil price shocks, with demand being more sensitive to price increases than decreases. Limitations include reliance on secondary data and potential unobserved variables. Practical implications highlight the need for sustainable transport policies, while social implications emphasize affordability and accessibility. The study’s originality lies in integrating oil price and income dynamics to forecast transportation demand.