Long- and Short-Run Effects of Fuel Prices on Freight Transportation Volumes in Shanghai

Abstract

Freight transportation modes consume enormous amounts of energy. This paper estimates the long- and short-run effects of fuel prices on freight volumes in various modes of transportation in Shanghai. Data included monthly changes during the period 2009–2016. Air cargo series were suggested to include one or two unit roots, and hence were removed from the cointegration analysis. Both the Phillips–Ouliaris and Johansen tests did not detect long-run relationships between real fuel prices, water cargo, road, and rail freight. Conventional first-differenced VAR (vector autoregressive) models were estimated. Overall, whether in the short- or long-run, real fuel prices did not influence freight transportation volumes. However, we found a Granger causality running from rail to road freight, as in the short-run (one month), a 1% change in rail freight would lead to a reduction of 0.07% in road freight. Therefore, simply by increasing fuel prices, the government could seldom encourage the shift from energy-inefficient modes of freight transportation to energy-efficient ones to achieve a sustainable freight transport. The allocation of more time and routes for rail freight traffic and the reduction in rail freight taxes may increase the rail freight volume and hence decrease the overall energy use. Our findings, to some degree, contribute to freight transportation economics. Future research may examine the impact of gasoline prices or diesel prices on freight traffic volumes.