By on March 3, 2008

kauai_gas_prices_222.jpgAmericans grumbled but they paid $2.00, and then $3.00 a gallon gas. Economists who study such things say U.S. drivers in a growing economy simply endured those price spikes, spending less elsewhere rather than changing their driving habits. But now, according to The Wall Street Journal [sub], those same economists see a broadly-troubled economy in which everything from food to health care costs more. The shift in both perception and reality is finally forcing Americans to drive less, and even to take (gasp!) public transportation. To wit: domestic gasoline consumption declined by 1.1 percent in the past six weeks. Lehman Brothers analyst Adam Robinson calls the potential for a long term conservation effort by Americans, "a major structural change in the market." Peak Oilers call it, "demand destruction." The working poor call it "more of the same."

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31 Comments on “U.S. Gas Consumption Declines by 1.1%...”


  • avatar
    garllo

    Maybe I’m”nostalgic” but in my many years of business experience, prices usually rise and fall based on demand in the market place. Who’s getting rich here???

  • avatar

    No wonder – oil just hit USD 103/barrel ten minutes ago.

  • avatar
    tdoyle

    When the average American (me) sees the cost per gallon of fuel go up and down and up and up and up coupled with the fact that Big Oil is experiencing record profits, we think only one thing-We Are Getting Screwed…

    When the fillup of my F150 went from $60 to $80, I felt like I was getting shafted…

    When my Focus fill up reaches $45, my wife and I will certainly make a concerted effort to drive less. But you have to get around, and you have to use fuel, or walk. It really does break down your overall confidence in the economy, one price increase at a time.

  • avatar

    Who is getting rich? Some speculators ,but primarily the states that own the oil fields. Here is a map showing the distribution of Sovereign Wealth Funds. See a pattern?

    http://image.guardian.co.uk/sys-files/Guardian/documents/2008/02/29/SOVEREIGNwealth.pdf

    http://www.guardian.co.uk/business/2008/mar/01/oil.globaleconomy1

  • avatar
    NoneMoreBlack

    Economists call it: downward sloping demand curves. “Long term conservation efforts” have nothing to do with it beyond the long run elasticity of fuel consumption as consumers subsitute towards efficient vehicles when time comes to replace the old car.

  • avatar
    ihatetrees

    Donal Fagan:
    Who is getting rich? Some speculators ,but primarily the states that own the oil fields.

    Don’t forget firms that excel in getting the stuff out of the ground. (Exxon-Mobile, BP, etc…)

  • avatar
    BostonTeaParty

    All this moaning, but in the UK gas/petrol was at 1.05GBP per litre, over $9 a gallon if i’ve got my conversions right. Imagine filling your F150 up with that. Prices are rising here and its only going to get worse, euro prices here we come.

  • avatar
    detroit1701

    What is amazing is that there is no sense of political outrage these days. We have a President who could really care less about global oil prices or the falling dollar. He goes beyond that — he is utterly flippant about it.

    Gas has tripled in price in the past five years. Demand has not. Unlike other commodities (food, for example), there is no ready alternative to consumption of oil. Decreasing residential fuel costs is not just simply a matter of “buying a hybrid” or “moving closer to work” or “taking the bus.” For the vast majority of those adversely affected, none of these are an option. (1) Hybrids are expensive vehicles, (2) selling your home in this market may not be a wise choice, and (3) public transportion is woefully inadequate in the vast majority of U.S. municipalities. (I do take the bus to and from work).

    Then talk about commercial trucking costs, airplane flights, plastics, power plants, etc. etc. It just gets worse.

    The bottom line is this: The United States promised everyone a single family home, two cars in the garage, and cheap fuel prices. Our entire national infrastructure (save a few major cities) has been built up on that idea. We have extensive expensive freeway systems to maintain, and no national high speed rail lines. At a certain point, our Government needs to solve the problem, or at least help the country transition away from world oil price and currency fluctuation. Neither is being done.

  • avatar
    GS650G

    gas consumption more than tripled in Asian countries, that demand continues to push the price of oil up. Bush can do nothing about it. The price we pay is based on the price of the raw material and no one man or government sets that price out of spite.

    Welcome to the new reality of energy costs.

  • avatar
    detroit1701

    GS650G,

    With all due respect, spare me the “it’s a free market, and that’s the way it goes.” The oil trade is primarily administered by a cartel — a cartel that sets production, and profits enormously in the current regime. Countries are free to, and do, negotiate side deals with oil-producing nations to buy directly at a cheaper cost than the global price (the U.S. / Canada relationship is a good example).

    The United States government has plenty of power to “do something” about the costs to consumers. Relax federal fuel taxes, develop known oil resources in North America, regulate oil companies as “utilities,” pump billions to universities and businesses to bring to solve battery and fuel cell problems, look into coal-into-diesel technologies, relax diesel emission standards temporarily, re-examine and repromulgate safety standards in light of the added weight to a car, invest in national rail technologies, energetically develop and subsidize electric municipal public transportation solutions, build nuclear power plants.

    It is not what the U.S. can do to bring down world oil prices — it is what it can do to alleviate its effects.

  • avatar
    BuckD

    I blame the Bilderberg Group

  • avatar
    Bancho

    @ detroit1701

    I beg to differ. Local demand may not have increased, but global demand certainly has. That global demand is only going to continue to increase.

  • avatar
    William C Montgomery

    The United States government has plenty of power to “do something” about the costs to consumers. Relax federal fuel taxes, develop known oil resources in North America, regulate oil companies as “utilities,” pump billions to universities and businesses to bring to solve battery and fuel cell problems, look into coal-into-diesel technologies, relax diesel emission standards temporarily, re-examine and repromulgate safety standards in light of the added weight to a car, invest in national rail technologies, energetically develop and subsidize electric municipal public transportation solutions, build nuclear power plants.

    Sounds like your problem is with congress, not the president.

  • avatar
    SherbornSean

    Oil prices revolve not around supply and demand, but rather expectations of future supply and demand. As the leading source of demand, all the US needs to do is reduce expectations of our demand for oil.

    How? one way would be to announce an extra $1 per gallon tax, starting in 2 years.

    Popular? No, not at first. But if it moves oil from $100 back to $30, you’ll be paying less than $3 per gallon at the pump, and the federal deficit will start to fall as well.

  • avatar
    Steve_K

    I recently stopped carpooling, to recoup about an hour of my day. I was even carpooling with friends so it was enjoyable, but I’d rather have the freedom and flexibility of having a vehicle accessible 100% of the day. Truck will be paid off this year so that will offset my cost of consumption @ 16-18 mpg. There’s absolutely no way for an econohybeercan to beat an old gas hog with low insurance and no payments. How’s THAT for economics?

  • avatar
    William C Montgomery

    SherbornSean:
    The effect of your plan would be short-term at best. Market expectations would adjust and we’d be right back where we began – plus an extra $1 gallon tax. Remember, crude oil production (i.e. pumping the junk out of the ground) would be scaled back on the expectation of decreased demand to avoid an industry-crippling glut of oil.

  • avatar
    97escort

    Oil will never go back to $30. We are near or at Peak Oil. The dollar is collapsing and oil demand in Russia, China and India as well as rich Middle East oil states is rising. An increase in the gas tax, which I favor by the way, will result in reduced American consumption, but Jevon’s Paradox will take over and the oil saved will be consumed in the aforementioned high growth countries. It’s a different world where Americans don’t call the shots any more if we ever did. It’s all very bad for the big 2.8 in anycase.

  • avatar
    ttac2000

    We need to increase the federal gas tax in a big way and roll the proceeds into Mass Transit infrastructure / Transit oriented development / high mileage R&D and so forth.

    Higher gas taxes = higher gas prices = consumers shift to smaller cars. See Europe for examples of this.

    Subsidizing cheap oil prices, so that the whole country can drive huge SUVs alone to work 100 miles round trip is absurd. And gets more absurd each day, as the deficit grows and the cost of keeping oil flowing from the middle east becomes more of a burden.

  • avatar
    quasimondo

    So we increase the taxes only to see the money swallowed up into the big budgeting hole that makes up this government?

    No thanks, I’ve had enough of uncle sam digging into my pockets, no matter how ‘noble’ you think the cause is.

  • avatar
    Bancho

    I think that if more people start driving more fuel efficient cars then higher taxes on the fuel are almost a foregone conclusion.

  • avatar
    ttac2000

    So we increase the taxes only to see the money swallowed up into the big budgeting hole that makes up this government?

    No thanks, I’ve had enough of uncle sam digging into my pockets, no matter how ‘noble’ you think the cause is

    Uncle Sam has already dug (and continues to dig) in your pockets to spend hundreds of billions on highways and oil subsidies (both direct and indirect), running up the current account deficit and causing a myriad of problems.

    Reducing our dependance on oil will help reduce the trade deficit, trim the military budget, reduce funding to our enemies through oil revenues, and make the economy more efficient.

    I personally hate turning to the government for a solution, but the “free market” is so distorted with regards to oil, I don’t really see another way

  • avatar
    SunnyvaleCA

    BostonTeaParty, not quite right if converted to US gallons. Perhaps you meant $9.48 per imperial gallon. Try typing this into a google search: 1.05 GBP per liter in us dollars per us gallon. Google can do unit conversions as well as currency conversions. You come out with $7.89/gallon. Still, that’s unfathomable for most people over on the US side of the pond. Here in my area I’m seeing only $3.80/gallon for so-called “premium” fuel (just barely high enough octane to not destroy my engine).

  • avatar
    quasimondo

    Uncle Sam has already dug (and continues to dig) in your pockets to spend hundreds of billions on highways and oil subsidies (both direct and indirect), running up the current account deficit and causing a myriad of problems.

    Reducing our dependance on oil will help reduce the trade deficit, trim the military budget, reduce funding to our enemies through oil revenues, and make the economy more efficient.

    I personally hate turning to the government for a solution, but the “free market” is so distorted with regards to oil, I don’t really see another way

    And so because their hands are already deep into our pockets, we should let them dig even deeper? No way, Jose.

    If anything, this idea of pulling more money from your taxpayers are just as short-sighted as those ideas that any problem can be solved by simply throwing more money at it. It’s also unimaginative. Trying to get people to change their behavior by beating them senseless with financial sticks is analgoulous to beating your child to break his bad habit. Where are the carrots, people?

    Then you still have to wonder if the extra revenue generated by increased gasoline taxes will really go into something beneficial or will it just be used to shore up some budget shortfall brought about by financial incompetence?

  • avatar
    Scott Baysinger

    BostonTeaParty,

    I currently calculate 1.05 British Pounds per litre as about $7.89 per gallon. Nonetheless I feel sympathetic since we pay about $3.45 here in Los Angeles.

  • avatar
    threeer

    So instead, we sit idle and do nothing? The American mindset is still stuck on a “bigger is better” mentality. We truly believe that inexpensive fuel is our right, regardless of the fact that fuel prices are going up, will continue to do so, and resources are dwindling. Ok, so maybe we won’t run out of gas in the next twenty years or so, but we are rather short-sighted and are setting our children up for a rough road. Do I believe in an overbearing government? No…but then again, I don’t see a huge shift in public behavior. I’m still seeing parking lots full of SUV’s and full-sized trucks (which makes it really hard to find my poor little Tercel!). Sure, if your gas hog is totally paid for and insurance is low, then you can probably offset the rising fuel costs, but I’d wager to bet that those Yukons and Escalades I see along I-26 probably aren’t paid for, and are also likely to be overkill for the application (one passenger in each vehicle). What’s the answer? Probably a combination of public perception and some government policy change(s). We’ve all heard the battle cry of reducing our dependance on foreign oil…but see very little actionable items coming out of that (well, other than Bush’s seeming ignorance that prices have actually gotten as high as they have).

  • avatar
    jkross22

    There does need to be incentives for people to buy more fuel efficient cars. Tax breaks for the car buying public would likely work better than the overly draconian “increase the gas tax” fervor.

    I know…. let’s call it a tax break for the middle class so that all 3 candidates can appear to be fighting for the everyday working man/woman.

    Hillary, John and Barak… You’re welcome.

  • avatar

    carbon tax so the market can choose how best to divide it among cars, home heating, and everything else that causes CO2 emissions.

    Use the proceeds to provide income tax relief.

    If I didn’t think global climate disruption was a real problem I’d favor an oil tax–again, so that the market could sort out peoples desires and driving woudln’t have to bear the brunt of it.

  • avatar
    mel23

    We think we got problems with gas going up. The price of sawdust has gone from $25 a ton in 2006 to over $100 today in some markets. So hold off on your plans to convert your cars to sawdust power.

  • avatar
    garllo

    “Oil prices revolve not around supply and demand, but rather expectations of future supply and demand. As the leading source of demand, all the US needs to do is reduce expectations of our demand for oil.

    How? one way would be to announce an extra $1 per gallon tax, starting in 2 years.

    Popular? No, not at first. But if it moves oil from $100 back to $30, you’ll be paying less than $3 per gallon at the pump, and the federal deficit will start to fall as well.”

    Now there is a great idea!Let’s give the polititians more money to squander. How about this; Improve public transportation, move more freight by rail instead of trucks and I’ll bet that someone somewhere in this great nation will or has already come up with a sythetic fuel to augment alternitive powered vehicles. The USA can do great things but it seems that we have to be pushed into a corner to act. I have taken the Eurostar from Paris to London-186mph-smooth quiet and reliable but I dread taking the Metro into NYC. We can have the same trans here and as far as gas prices in Europe, most of that IS tax but when you need medical care it’s free and as far as paying down the deficit how’s this? Spend less!We have to stick together but I doubt that that will ever happen because everyone has their own agenda but one thing is for sure-We’re all in this together!

  • avatar

    @jkross22
    Over in the thread about GM and Chrysler, one poster described visiting a Honda dealer to look at a Civic. Well, there weren’t any to look at, they were all sold – and “do you want us to get in touch when we get some more in about two or three weeks?”

    I think people are arriving at a conclusion as to which cars to buy independently of Lutz’ pipe dreams.

  • avatar

    Fuelgagereport has the data.

    http://www.fuelgaugereport.com/

    There are outliers edging above USD4 — but the averages from the link above are a good guide.


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