18 July 2007

OK, but if they go any higher, THEN we'll cut back...

A Reuters/Zogby poll released today concluded that 40% of Americans would curb their driving habits if gas reached $3.50 per gallon. Somehow, I do not believe this. It's not that I am disputing the poll or its methodology; I dispute that Americans know what they are talking about with gas prices and how they will behave.

Gas prices in late May were already at an average of $3.23 per gallon nationwide. Assuming 22.5 miles per gallon combined economy and 15,000 miles driven per year, the annual cost difference between $3.23 and $3.50 per gallon is $180.09. That means a monthly difference of $15 or a weekly difference of $3.46.

Believe me, I complain about high gas prices as much as the next guy. We own two V6-powered vehicles (though one is a 5000-pound midsize body on frame SUV) and our "fleet average" is pretty close to 20 or 21 miles per gallon (the car a little above that, and it's driven more; the SUV a little below that, and it's driven less). I just don't find it terribly credible for people to say that they will cut back on their driving if gas goes up another 27 cents per gallon from its late-May highs. Instead, I think that the steady climb of gas prices, particularly since early 2005, has almost conditioned the American public to accept them. I actually caught myself calling $2.74 per gallon "cheap" last weekend (and it was, relative to the prevailing $2.90 per gallon everywhere else near me). Meanwhile, US petroleum consumption - in spite of high prices - is actually increasing year over year. The fact is, most people have already cut out extraneous travel from their driving and are combining trips and using

I won't talk much about advocating a gas tax at this time, but ironically, the one period when US petroleum consumption slowed or even declined in the past few years was immediately following Hurricane Katrina, when gas prices suddenly jumped $0.50 or more per gallon. It was a shock to consumers, rather than the Chinese water torture of steadily increasing prices has been for the past two years. Something sudden - like a tax - would likely have the same result.

The overall poll results about how gas prices would affect consumer behavior are:
  • 40% would curb their driving habits at $3.50 per gallon
  • 19% would curb their driving habits at $4.00 per gallon
  • 9% would curb their driving habits at $4.50 per gallon
  • 7% would curb their driving habits at $5.00 per gallon
  • 19% could not curb their driving habits regardless of price
The total above is 94%. Therefore, the implication is that in spite of gas prices being near all-time records in inflation-adjusted dollars, only 6% of drivers have curbed their driving habits.

A spokesperson for AAA, Geoff Sundstrom, probably said it best when he said, "It's so hard to read what consumer behavior is going to be at higher price pionts - be that $3.50 per gallon or $4.00 per gallon - because we're all in uncharted territory."

However, given past history of the way Americans have complained, but basically shrugged off high gas prices, I expect more of the same as prices continue to rise in the coming years.

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