Despite a not insignificant investment of brain cells, I admit to continued ignorance of the ways of economics. Perhaps some of the smart people who read this blog can help me understand this:
Gasoline demand for the four weeks ending May 26 averaged over 9.3 million barrels per day, an increase over last year, despite average retail prices in May being 75 cents per gallon higher than they were a year ago.
Traditional economics would suggest that when the price of something rises, we buy less of it, right? I don’t get it.
Our live-work gap [the separation of our living space from our working space] and lack of viable transit precludes our driving autos much less, John.
Most of our Vehicle Miles Traveled are to-from work. And we can’t very well not ferry the kids to soccer practice in the middle of the season.
Elasticity of demand requires alternatives. We have none to the automobile for 90% of our citizens, due to our development patterns and auto-centric transportation.
Best,
D
Or, in other words, gasoline is a utility like electricity and water.
John,
Less compared to what? I bet that the demand for gasoline has been rising pretty steadily, in which case a price rise may only cause a slowdown compared to what would otherwise have happened. Besides, gasoline is notoriously price-inelastic over the short term, and anyway it’s still cheap enough that the price rise doesn’t actually matter in terms of affecting behaviour (despite the bleating to the contrary).
We like the convenience of having personal transportation, and we have yet to reach the breaking point. Then there’s the fact that gasoline in this country is still cheaper than the days of the oil embargo back in the 70’s when prices are adjusted for inflation. Note the lack of gas lines these days. People don’t see the need to horde for bad times ahead.
This could change, but most folks don’t let possibilities bother them. It’s not could be’s that get people to act, it’s when the event is already underway.