With ISLA support, Economics Ph.D. student Aram Derdzyan investigates oil markets and vehicle sales

Author: Josh Tychonievich

Aram Derdzyan

With the support of an ISLA Graduate Student Research Award, Economics Ph.D. student Aram Derdzyan gained new insight into the relationship between oil markets, gasoline prices, and vehicle sales. 

Since the 1970s, manufacturers have worked to meet the growing demand for more fuel-efficient cars. Previous research has shown that fluctuating gas prices have largely driven this broader development, but scholars have had little to say about these trends after 2008 when Tesla Motors introduced the electric Roadster. Since then, sales of hybrid and electric cars have increased significantly.

In his research, Derdzyan uses unique micro-data to examine not only the effect of high gasoline prices but also that of market uncertainty on individual vehicle sales between 1978 and 2021. Both US gasoline and global oil markets have undergone major structural transformations since 2008 due to developments like the shale oil boom and regulations like the Renewable Fuel Standard. Have these changes helped spur the switch to more fuel-efficient vehicles? 

To answer this question, Derdzyan purchased a comprehensive dataset of monthly car sales. This dataset provided 43 years’ worth of information on vehicle sales by make, model, group, source, power type, and country of production.

Derdzyan found that people do, in fact, buy more fuel-efficient cars during times of higher uncertainty. When people are concerned about instability, they pay greater attention to their income and expenses. Fearing that their household income may decline or gasoline prices might increase, most people choose relatively more fuel-efficient cars. 

These preliminary findings will form part of Derdzyan’s dissertation, which will also examine different measures of uncertainty and incorporate electricity prices and electric vehicle efficiency.

Derdzyan hopes his research might help address the threat of climate change. Understanding when and why people are driven to purchase fuel-efficient vehicles could prove crucial to accelerating the movement towards more climate-friendly transportation.

“Climate change is one of the biggest challenges of the twenty-first century,” he writes. “My research helps us understand one of the key contributors to the climate crisis (i.e., emissions by cars).” 

Aram Derdzyan is a Ph.D. student in the Department of Economics and a Ph.D. Fellow of the Kellogg Institute for International Studies at the University of Notre Dame. He previously worked as an Economist at the Central Bank of Armenia before joining the Ph.D. program. He holds a B.A. degree in Economics (with honors) from Yerevan State University (YSU) and an M.A. degree in Economics (with honors) from the International School of Economics at Tbilisi State University (ISET). His research interests lie in Applied Macroeconomics, Energy Economics, and Development Economics.