Real change in transport prices by mode (TERM 020) - Assessment published Jan 2011
On average over the period 1998 to 2009, passenger transport prices have increased at a higher rate than consumer prices. However, in 1998, 2001 and now again in 2009, the relative volatility of the transport market has been highlighted, as overall transport prices fell at a faster rate than consumer prices. This is primarily due to significant drop in the average crude oil price between 2008 and 2009, which led to reductions in fuel prices. In particular, 2009 saw a decline in prices for air passenger transport and the operation of personal transport equipment, both of which increased in the previous year. In addition, the purchase price of motor cars continued the downward trend that has been consistent over the past decade. For freight transport prices, no EU-wide data exists, but as an example UK road freight prices have increased by a small amount over this period; transport of goods into the UK by sea have continually declined as economies of scale continue to take effect (larger ships travelling longer distances).
Are passenger transport prices increasing at a higher rate than consumer prices? Are transport prices givin appropriate signals to transport users?
Real price indices of passenger transport based on a fixed transport product in the EU 25 Member States (2005=100)
Note: Real change in passenger and freight transport prices by mode, relative to average consumer prices (CP00). Data for entire EU-27 are available. However, very low consumer price indices in Romania and Bulgaria prior to their accession distort the weighted average and hence have been excluded.
Eurostat - Harmonised Indices of Consumer Prices, Economy and finance (data)/Prices/Harmonised Indices of Consumer Prices (HICP)/ Harmonised Indices of Consumer Prices (2005=100) – Annual Data (Average Index and rate of change).
http://epp.eurostat.ec.europa.eu/portal/page?_pageid=0,1136173,0_45570701&_dad=portal&_schema=PORTAL [accessed 2 September 2010]
Prices are relatively easy to measure and compare over time, as long as the product or service in question stays the same. However, there are variations that take place over time that can affect the reliability of the comparison. For example, people tend not to purchase the same cars as ten years ago, and don’t use the same package of transport services (price/quality) as previously.
Therefore, only limited conclusions about trends in transport prices can be drawn. Most care should be taken when interpreting the prices related to the purchasing of cars and air travel prices. The price and quality characteristics of these products have changed the most during the recent years. For example, in air transport, an increasing share of travellers are choosing low-cost carriers that offer less service for lower prices.
On average over the last five years, transport price indices for the EU-25 Member States show that real (inflation adjusted) passenger transport prices have increased, making transport increasingly expensive in comparison with other consumer goods and services. However, in 2009 – potentially driven by the recession and a significant drop in the price of crude oil – falls in car purchase prices, aviation travel and operation of personal transport equipment have contributed to the first year-on-year decrease in overall transport prices since 2002. Differences appear between countries and modes.
Vehicle purchase prices have steadily fallen in relation to average consumer prices, making it easier for people to afford a car. This may, probably in combination with rising real incomes, have been an important driving force behind the increased vehicle ownership in the EU (see TERM32 Size and Composition of the Vehicle Fleet). Increased vehicle ownership is the primary driver behind increased choice of cars as a transport mode. This often leads to increased transport demand and subsequent environmental pressures as the costs for vehicle use are relatively low and many cost items are fixed (e.g. depreciation, insurance and holder’s tax). Similar trends are seen in the newer Member States as greater affordability of car purchases is even more pronounced. However, the effect of the availability of cheaper passenger cars is probably smaller than depicted, as people do not tend to purchase the same types of cars as ten years ago. Instead, households may purchase larger and more luxurious cars, spending an even greater share of their income on vehicle purchase than before (see TERM24 – Expenditures on Personal Mobility). However, the impact of the recession from 2008 has led to a significant reduction in overall car sales and a reduction in the gap in price between new and used cars. This is because dealers are reducing the prices of new cars to stimulate demand and people are hanging onto their existing car for longer, reducing the supply of used cars to the market which has driven up prices.
In the past, rises in the price indices for air travel have not been regarded as representative due to the growing market share of low-cost airlines and greater competition. The fall in air transport price between 2008 and 2009 is likely to be due in part to the significant fall in crude oil price over the same period, and potentially also due to airlines reducing prices to encourage sales in the recession. The rising real cost of travelling by rail, in contrast, has risen steadily since 2000, and at an ever increasing rate. One possible cause for this rise is the increasing share of high-speed rail in European transport; since 2000 the share of high-speed services in passenger rail travel in the EU-27 has increased by 50%, to nearly a quarter in 2008 (European Commission, 2010). Since an increasing proportion of passenger rail (especially high-speed) is electric-powered, prices are less closely tied to the price of crude oil.
Are freight transport prices increasing?
Real Price UK Freight Price Indices (2005=100)
Note: Case study of the United Kingdom: prices for freight transport on commercial ferries, by road and by sea between 1998 and 2009
UK National Statistics, National Statistics/Services Producer Prices Index (experiemental)/Q1 2009 Data. http://www.statistics.gov.uk/statbase/product.asp?vlnk=15358, http://www.statistics.gov.uk/pdfdir/sppi0810.pdf [accessed 2 September 2010]
Little information is available regarding freight transport prices. Using a case study of the United Kingdom, prices for freight transport on commercial ferries and by road have increased over the period 1998 to 2009. Prices for freight transported by sea, however, have in general declined over this period (see Figure 2). The cost decreases for water transport are largely a result of economies of scale (larger ships and longer distances). It is not completely clear what drove the increase in price from 2007 for road transport and commercial vehicle ferry transport when fuel prices have decreased due to the recession in 2008-9. However, it seems likely this could be due to the significant relative weakening of the GB pound against the US dollar in this period in combination with duty increases.
Indicator specification and metadata
Real price indices of passenger transport based on a fixed transport product in the EU 25 Member States, relative to average consumer price index (HICP).
Harmonized Indices of Consumer Prices (HICPs) give comparable measures of inflation for the countries and country groups for which they are produced. They are economic indicators that measure the change over time of the prices of consumer goods and services acquired by households. In other words they are a set of consumer price indices (CPIs) calculated according to a harmonised approach and a single set of definitions.
In particular, HICPs provide the official measure of consumer price inflation in the euro area for the purposes of monetary policy and the assessment of inflation convergence as required under the Maastricht criteria.
Price indices, 2005 = 100. All indices are relative to the overall consumer price index (HICP), CP00.
Policy context and targets
No targets currently exist for transport user prices in the (liberalised) transport market. However, by applying fair and efficient pricing, the balance between transport modes may be affected, since the level of externalities and the room for improvement may differ between modes. The EC’s 2001 White Paper states that the rights and obligations of users should be recognised, including reinforcing the right to have access to high quality services providing integrated services at affordable prices (EC, 2001).
Transport prices can and should reflect a range of elements, including costs of tackling congestion, the greenhouse gas effect and building infrastructure, whilst also improving safety on the road or in public transport and minimising environmental disturbances. There is also the cost of investment to provide better control of transport, putting new trains on the tracks and building new infrastructure. Therefore the benefits of society and transport users should be reflected more or less in the price users pay for transport, but without affecting access to a good quality, continuous service throughout the Community. The Commission previously concluded that “one of the important reasons why imbalances and inefficiencies have arisen is because transport users have not been adequately confronted with the full costs of their activities … As prices do not reflect the full social cost of transport, demand has been artificially high. If appropriate pricing and infrastructure policies were to be pursued, these inefficiencies would largely disappear over time” (EC, 2001).
Passenger transport in Europe is predicted to grow by about 40 % between 2010 and 2050. With this significant growth in transport use, it is important that prices are monitored to see if users are given appropriate incentives to use more environmentally friendly modes of transport. Changes in transport prices drive individual and business transport decisions; fair and efficient price signals are required.
The cost of transport reflects market changes such as vehicle technology developments, international energy price evolution and state interventions through regulations, subsidies and taxation (see TERM 21). Government actions can internalise the environmental externalities of different transport modes, which can lead to users shifting between modes. The economic incentives for modal shifts can be monitored through the indicator of transport prices by mode.
Related policy documents
COM (2001) 370 final. European transport policy for 2010.
WHITE PAPER European transport policy for 2010: time to decideCOM (2001) 370 final
Methodology for indicator calculation
Transport prices data are collected annually from individual member states by EUROSTAT. The Harmonised Indices of Consumer Prices (HICPs) are used – a comparable index of consumer prices produced by each EU Member State. They are calculated according to a harmonised approach and a single set of definitions, providing an official measure of consumer price inflation in the euro-zone for the purposes of monetary policy in the euro area.
Methodology for gap filling
No gap filling has been undertaken in the development of this indicator.
No methodology references available.
No uncertainty has been specified
Data sets uncertainty
The accuracy of HICP is generally considered to be high. The accuracy of source data is monitored by assessing the methodological soundness of price and weight sources and the adherence to the methodological recommendations. There is a variety of data sources both for weights (National Account data, Household Budget Survey data, etc.) and prices (visits to local retailers and service providers and central collection via mail, telephone, e-mail and the internet are used). The type of survey and the price collection methods ensure sufficient coverage and timeliness. The outlets, from which prices are collected, are chosen to represent the existing trade and services network and they are based usually on three main criteria: Popularity with consumers, significant turnover from consumer sales and availability of goods and services included in the HICP basket. All the private households in the economic territory of the country are covered, whether resident or not and irrespective of their income.
Furthermore, Eurostat and the Member States are actively following up an Action Plan concerning quality adjustment and sampling issues. Concrete best practices have been agreed for a range of specific goods and services (in particular cars, consumer durables, books and CDs, clothing and computers).
The HICP does not capture changes caused by market shifts from one product to another of higher (or lower) quality. In particular, the increasing market share of low-cost air carriers for passenger travel does not put downward pressure on the price index. This issue is likely to have a significant impact on demand.
The method used by the UK to re-reference to 2005=100 differs from that used by all other EU and EEA countries in that the UK has used un-rounded index levels for rescaling and computed inflation rates from the unrounded and re-referenced index series.
No uncertainty has been specified
Transport statistics - freight (Eurostat)
provided by Statistical Office of the European Union (Eurostat)
Services producer price indices
provided by Office for National Statistics (ONS)
Transport (Primary topic)
Typology: Descriptive indicator (Type A - What is happening to the environment and to humans?)
- TERM 020
Contacts and ownership
EEA Contact InfoCinzia Pastorello
EEA Management Plan2010 2.9.2 (note: EEA internal system)
Frequency of updates
- 15 Sep 2010 - Real change in transport prices by mode (TERM 020) - Assessment published Sep 2010
- 28 Oct 2005 - Real change in transport price by mode
- 28 Jun 2004 - Real change in transport price by mode
- 01 Jun 2001 - Real change in transport price by mode
- 01 Jun 2001 - Real change in transport price by mode
For references, please go to www.eea.europa.eu/soer or scan the QR code.
This briefing is part of the EEA's report The European Environment - State and Outlook 2015. The EEA is an official agency of the EU, tasked with providing information on Europe’s environment.
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