Effects of Rising Gas Prices on Bus Ridership for Small Urban and Rural Transit Systems

Rising fuel prices have led to significant increases in costs for public transit agencies. A possible benefit from higher gasoline prices, though, is an increase in public transit ridership. This study estimates the effects of gasoline prices on bus ridership by employing a variety of models. Since the price of gasoline can have a delayed effect on the demand for transit, a dynamic polynomial distributed lag model is utilized which measures short-run and longer-run effects. The model is applied to individual transit systems as well as aggregate data for cities grouped by size. A panel data model is also employed, which uses data for eleven transit systems over a period of ten years. These models are applied to small urban and rural transit agencies in the upper Midwest and mountain states. The results show that bus ridership is fairly inelastic with respect to gasoline price. Most of the estimated elasticities are in the range of 0.08 to 0.22, with two estimates being as high as 0.5. Higher gasoline prices do lead to increased ridership, but the increases in fare revenues are not enough to cover higher fuel expenses for transit systems.