Iran war: Higher petrol prices do change driver behaviour ‒ just not by much

Saturday, 14 March 2026

ANALYSIS: There’s not much motorists can do about rising petrol prices in the wake of the turmoil in the Middle East, right ‒ or is there?

Academic research suggests that while the demand for petrol is relatively “inelastic” ‒ which is economic jargon for saying people don’t cut back a great deal when prices rise — that does happen to a degree.

Studies have often measured the elasticity of fuel, and oil more generally, in developed economies about negative 0.2.

What that means is that if the petrol price rises 10%, people can be expected to cut back the amount they buy by about 2%.

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That needn’t just involve not driving, driving less, or car-pooling.

Families who have two cars might be expected to use their smaller, more efficient car more often.

Drivers may think twice about belting it out on the motorway, and check their tyre pressures more frequently and switch off the aircon to avoid wasting fuel.

Although it does vary by model, many cars are at their most fuel-efficient about 80 kilometres per hour, and Hyundai NZ estimates driving at 110kph rather than 100kph usually increases fuel consumption by between 10% and 15%.

Turning off the air-con commonly saves about 10%, it says.

Energy Efficiency and Conservation Authority (EECA) partnerships manager Richard Briggs has some tips that may be less common knowledge, or top of mind.

He recommends checking tyres monthly, and when they’re “cold”, not after a trip. Incorrect tyre pressure can eat up 5% to 8% more fuel, he says.

Briggs also advises motorists remove any unnecessary weight they may be carrying, such as bike racks or stuff left in the boot.

“If you’re driving in a 50 km/h zone, open windows. Faster than that, the drag from open windows will counteract the benefits of turning your air-con off, so close them and switch on your cooling, if needed.”

Regular maintenance and wheel alignments can help, as will switching off the engine rather than idling for more than 30 seconds, he says.

“If you’re in the position to be looking for a new car, check the Vehicle Emissions and Energy Economy Label to find the most efficient car in your range and consider an EV – they’re significantly cheaper to run and maintain than petrol or diesel cars, so you could make petrol price anxiety a thing of the past.”

In reality, there isn’t a single figure for fuel price-elasticity in any economy, or for any individual.

Motorists who have no choice but to drive a long distance to work may be most likely to feel disempowered, and the degree to which people can change their behaviour depends on how much time they have to do so.

Some motorists may find it hard to immediately cut their consumption but over time opt for EVs or smaller and more efficient cars if they find themselves forking out at the pump, for example.

Although it’s a bit dated, a working paper produced by the OECD in 2012 estimated that in Belgium, a 10% price rise would cause consumption to fall by about 1.8% in the short-run but 2.3% over the medium term.

A study conducted for the NZTA by consultant Booz Allen Hamilton, going way back to 2007, suggests New Zealand is in the same ballpark.

It estimated a $10 petrol price rise would cut consumption here by 1.5% within a year and by 2% after two years.

It is not an impossible thing to measure, as there is plenty of data on fuel prices and sales volumes in different countries, stretching back decades, and plenty of ways to filter out the “noise” caused by changing rates of economic growth and the like that would otherwise mess with the calculations.

A more recent major study of the price elasticity of oil itself — based on data spanning from 1980 to 2021 in 21 OECD states and published in International Journal of Energy Economics and Policy in 2024 — indicates not much may have changed since the earlier research.

It put oil’s price elasticity in those countries at negative 0.179.

In other words, for every 10% increase in the price of a barrel of oil, demand dropped just under 1.8%, showing there is at least something fuel buyers, collectively, can do.

CORRECTION: An earlier version of this story misdescribed the impact of driving at 110kph on fuel consumption. Amended 11.29am, March 14, 2026.