The Dance of the Gasoline Prices

Clearing out some old piles of reading material, I ran across an old CBO report from a year ago on gasoline prices. It seems so long ago, my obsession with elasticities (short term and long) and the effect of rising energy prices on behavior large and small.

Many drivers have responded to higher gasoline prices in the way that they drive, but overall the response has been very small.

Petroleum consumption

Petroleum consumption

Let’s check in, shall we, just for old times’ sake, on US petroleum consumption. I never tire of this graph, as our consumption falls off a cliff. You can seem consumption leveling off there in that cloud of dots during 2007, and beginning to drop in the first half of 2008. That’s the result of the price increase. Modest, as the CBO study notes. Then – yikes! Off a cliff. That discontinuity is on the demand side, unrelated to prices, because we are (or feel) broke.

Here, I’ll show you what I mean:

personal consumption spending

personal consumption spending


  1. If you look carefully, the gas consumption leveled off before the personal spending arguing that there were two drivers for the gas, one the rising cost of gasoline, followed by the economic collapse.

    It ain’t one thing or another, it is both.

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