A study by the Riyadh Economic Forum estimated the cost of traffic congestion in Riyadh, Jeddah, and the Dammam metropolitan area at around SAR 18 billion in 2025. But congestion’s economic cost is not limited to fuel and wasted time; it also affects productivity, supply chains, and quality of life. So how do economists calculate this cost? Why might economic growth lead to more congestion? And can cities solve the problem simply by building more roads?

When minutes on the road add up to billions

Every morning, a familiar scene unfolds in major cities: thousands of cars inch along, employees keep an eye on the clock, trucks wait to reach their destinations, and families try to stick to their schedules.

Congestion may look like a traffic problem caused by the number of cars and the capacity of the roads. But from an economic perspective, it is much broader than that. The time an employee spends on the road, a delayed delivery truck, and the higher cost of delivering goods are all examples of resources being consumed in ways that affect the efficiency of economic activity.

Saudi cities offer an illustration of the scale of this phenomenon. A study by the Riyadh Economic Forum found that traffic congestion in Riyadh, Jeddah, and the Dammam metropolitan area cost around SAR 18 billion in 2025. Riyadh alone accounted for SAR 11.4 billion—about 63% of the estimated total for the three cities.

These findings, reported by Al Eqtisadiah in a story by journalist Abdullah Al-Ruwaiqi dated October 13, 2026, raise a question that goes beyond Saudi cities: How can economists calculate the cost of something we do not directly buy or sell, such as the time we lose on the road?

How do economists calculate the cost of congestion?

In transport economics, the cost of a trip is measured not only by the money a traveler pays, but also by the time, effort, and operating costs involved.

Researchers use the concept of the “value of travel time,” an estimate of the value created by reducing the time it takes to reach a particular destination.

To understand the idea, imagine an employee whose commute takes an hour instead of half an hour. The extra time does not necessarily mean a cash loss equal to half an hour of their salary; it may be time they could have spent with their family, exercising, or resting.

Even so, that time has economic value because it is a limited resource that could have been used in another way.

This is where the concept of “opportunity cost” comes in: simply put, it is the value of the best alternative we give up when we choose to use a limited resource in a particular way.

When thousands of employees, truck drivers, and service providers are delayed every day, those scattered minutes add up to many hours spent traveling—and their value can be estimated economically.

Research organizations use different methods to estimate this value, including studying how much people are willing to pay to shorten a trip or measuring the impact of delays on business costs.

But an important point bears emphasizing: an estimated economic cost is not necessarily money that has actually been paid.

When a study says congestion cost billions of riyals, that does not mean the money was paid out of people’s accounts or the government budget. The estimate may include the value of extra time, fuel consumed, operating costs, and other economic and social effects, depending on the methodology used.

That is why it would be wrong to treat the entire figure as a direct loss to gross domestic product, or to assume it could all be recovered simply by eliminating congestion.

Why does someone else pay for your trip?

A key economic concept helps explain congestion: “external cost.”

An external cost arises when a decision made by a person or organization places a burden on others that is not fully reflected in the decision-maker’s own costs. Suppose a driver decides to take a busy road during rush hour.

The driver bears the cost of the trip in fuel, time, and vehicle wear. But joining the road may increase delays for other cars, even if only slightly. When many drivers make the same decision, those small effects build up and turn into widespread congestion.

Economists distinguish between the private cost borne by the driver and the social cost, which includes the effect of the driver’s decision on others. The problem arises when the cost an individual feels is lower than the cost their use of the road imposes on society.

Each driver may make a decision that seems reasonable to them, but the sum of those decisions can produce an economically inefficient outcome.

This is one of congestion’s paradoxes: individual decisions may make sense from each person’s perspective, but when combined, they lead to a less efficient outcome for everyone.

Is congestion a natural consequence of economic growth?

The Riyadh Economic Forum study found that congestion in Riyadh had increased by 86% compared with 2016. It pointed to population growth, horizontal urban expansion, growing reliance on private vehicles, and challenges in integrating urban planning with public transport.

To understand this relationship economically, we need to look at what happens as a city grows.

As the economy expands, new jobs are created, companies, shops, and restaurants open, and commercial and service activities grow. Each new activity can generate additional trips by employees, customers, and suppliers.

According to the study, Riyadh accounted for 50% of the new job opportunities created in the Kingdom from 2021 through the period covered by its findings.

Job growth signals an expanding economy, but it also shows how closely the labor market is linked to daily travel.

Workers need to get to their workplaces, customers need to reach services, and companies need to move materials and products between locations.

In urban economics, this is linked to “agglomeration economies”—the economic benefits that arise when businesses, workers, and services are concentrated near one another.

Proximity makes it easier to share knowledge, access skills, and reach markets, but it can also increase competition for space, roads, and infrastructure.

Congestion, therefore, is not always a sign of weak economic activity; it can also arise in cities experiencing rapid growth and expanding opportunities.

The challenge begins when demand for travel grows faster than the city’s capacity to accommodate it efficiently.

This is where integrating urban planning and transport becomes important: it is not enough to build new residential neighborhoods and business districts without considering how people will travel between them.

Ride-hailing and delivery apps: How has the digital economy changed how cities move?

Trips within cities are no longer limited to commuting to and from work. The digital economy has introduced new patterns of travel associated with ride-hailing and food and goods delivery apps.

Data from the Riyadh Economic Forum study illustrate the scale of this shift.

The number of ride-hailing trips carrying passengers rose from 18 million in 2019 to 92 million in 2025—more than five times the earlier figure.

In the delivery sector, the study reported around one million orders a day across the Kingdom, 74% of them concentrated in the evening, with the Riyadh region accounting for 45% of all orders.

These figures offer an important picture of how consumption and travel patterns within cities are changing.

Demand for food delivery, for example, is shaped by consumption habits, mealtimes, and shopping, and can generate traffic at different times from work and school commutes.

As a result, multiple waves of demand build up on the roads, some linked to work and others to commerce, services, and leisure.

But an increase in app-based trips does not necessarily mean that every trip adds a new car to the road. Some passenger trips may replace private-car use, while some delivery runs may combine several orders into one trip.

Assessing the impact of these services on congestion therefore requires looking at the number of vehicles, distance traveled, operating times, and which trips they replace—not just the number of orders.

Here we see another economic paradox: the digital economy may save consumers time, while shifting part of the travel burden to service providers.

The question remains: does this lead to more efficient use of roads, or does it put them under greater strain? The answer depends on the type of service, how it is operated, and user behavior.

The cost of congestion you won’t see at the gas station

Extra fuel may be the most obvious cost of congestion, but it is not the only one.

For businesses, unpredictable travel times pose an operational challenge. A delivery company, for example, needs to know not only the distance between its warehouse and a customer, but also when the delivery is likely to arrive.

When travel times become unpredictable, a company may have to build extra time into its schedules, change its routes, or allocate additional resources to keep the service running.

In transport economics, this is known as “travel time reliability”—how well the duration of a trip can be predicted.

A journey that consistently takes 40 minutes may be more useful to a company than one that takes 30 minutes in normal conditions but can suddenly stretch to an hour or more.

The economy is concerned not only with average travel time, but also with how consistent it is.

In supply chains, delays can affect the delivery of materials and products, with knock-on effects on inventory management and the efficient use of trucks and labor.

Some companies may have to change production and distribution schedules or absorb additional operating costs. This does not mean all costs are passed directly on to consumers, but they may affect service prices or companies’ profit margins.

From an environmental and health perspective, repeated stop-and-go traffic can increase fuel consumption and emissions under certain conditions, in addition to the effects of noise and exposure to traffic pollutants.

The cost of congestion is thus spread among many parties, not all of whom are sitting in the cars stuck in traffic.

Why doesn’t congestion disappear whenever we build a new road?

One of the most intriguing ideas in transport economics is known as “induced demand.”

This phenomenon means that increasing road capacity can encourage people to drive more, gradually filling some of the newly added space.

How does that happen?

When a congested road is widened, traffic initially flows better and the time needed to travel along it falls.

This improvement may encourage some drivers to return to the road after avoiding it, and prompt others to change their travel times or use their cars instead of other forms of transport.

Over the longer term, easier travel can also affect where people choose to live, work, and shop.

As a result, some of the improvement brought by road expansion is absorbed by additional demand for the road.

Economists Gilles Duranton and Matthew Turner examined this relationship in a 2011 study published in the American Economic Review, titled “The Fundamental Law of Road Congestion: Evidence from US Cities.”

For the urban interstate highways they studied in the United States, the researchers found that an increase in the number of lanes was associated with an approximately proportional increase in vehicle miles traveled.

This finding helps explain why new roads may fill up some time after they open.

That does not mean building or improving roads is pointless; expansion may be necessary to address specific bottlenecks or improve connections between areas. But it does mean that adding road space alone cannot guarantee a lasting end to congestion.

Roads are not just infrastructure that responds to demand; improving them can also change the level of demand itself.

How can cities reduce the cost of congestion?

If congestion results from the interaction of millions of individual decisions, addressing it requires more than adding lanes.

In transport economics, solutions are considered from two complementary angles: improving the efficiency of vehicle movement and managing demand for travel.

Upgrading intersections, improving traffic signal timing, and managing incidents can make better use of existing roads.

At the same time, effective public transport can offer people an alternative to private cars, especially when services are regular and connected to residential, employment, and service areas.

Flexible working hours and remote work, where the nature of a job allows, can also help spread some trips across different times or reduce the need to travel.

These are among the proposals raised by the Riyadh Economic Forum study, along with reorganizing working hours to ease the concentration of traffic.

Economists also discuss “congestion pricing”: charging for the use of certain roads or areas during peak periods, so that the decision to travel reflects more of the cost it imposes on others.

But this solution is not automatically suitable for every city. Its effectiveness and fairness depend on how charges are designed, whether transport alternatives are available, and how the charges affect people with different incomes and those with little flexibility in their work schedules.

Most importantly, urban planning itself can shape demand for travel. When more services and job opportunities are available close to residential areas, people have less need to cover long distances for everyday activities.

The goal is not to eliminate travel, but to make it possible to reach what people need at the lowest possible cost.

Is all congestion an economic loss?

Despite the costs described above, not every slowdown in traffic should be treated as a loss that must be eliminated entirely.

Congested cities can also be vibrant centers of employment, commerce, and services, and the geographic concentration of businesses and workers creates important economic benefits.

Moreover, achieving completely clear roads at all times may require massive investments that are not justified by the benefits they would bring.

For this reason, economic analysis does not necessarily aim for entirely free-flowing traffic. Instead, it seeks a level of road use that balances the benefits of travel against the costs it imposes.

The International Transport Forum of the Organisation for Economic Co-operation and Development emphasizes that the total cost of congestion should not be considered in isolation from a city’s circumstances, or treated as if every delay could be eliminated economically.

The key questions are which types of delay can be reduced, how much benefit that would bring, and whether those benefits outweigh the cost of the proposed solutions.

That is what makes economic cost estimates tools for comparison and decision-making, not just figures representing losses.

From vehicle speed to the value of access

The figures revealed by the Riyadh Economic Forum study bring us back to the central question: what should cities measure when they seek to improve traffic?

Does success mean simply making cars go faster, or enabling residents to reach their jobs, schools, hospitals, and shops easily, reliably, and at a reasonable cost?

The difference between the two questions is fundamental.

Access to services can improve through public transport, nearby facilities, or reduced need to travel—even without a significant increase in vehicle speeds.

The issue then becomes not merely traffic management, but the management of a shared economic resource: time.

The SAR 18 billion estimated by the study for the three Saudi cities shows the scale of the issue in a specific local context, but the economic idea it reveals is not tied to any particular country or year.

Every growing and expanding city faces a similar question: how can it reap the benefits of economic concentration without allowing travel costs to consume an increasing share of those benefits?

Ultimately, the true cost of congestion is not just the sight of stationary cars, but the opportunities and resources that could have been put to better use.

Economics does not ask only: How much time do we spend on the road? It asks a deeper question: What could we have done with that time, and how can we make reaching our destinations less costly for everyone?