Staff Contributors
Staff Contributors
Adam Browning
Adam Stein
Alan Durning
Andrew Dessler
Andrew Sharpless
Ariane Lotti
Ben Tuxworth
biodiversivist
Brad Johnson
Coby Beck
Edward Mazria
Eric de Place
Erik Hoffner
Frank O'Donnell
Gar Lipow
Glenn Hurowitz
Guest author
Jason D Scorse
Jim Goodman
JMG
John McGrath
John McQuaid
Jon Rynn
Joseph Romm
Josh Dorner
Ken Ward
Kit Stolz
Laura Hess
Lisa J. Bunin
Lou Bendrick
Maywa Montenegro
Melinda Henneberger
Meredith Niles
Michael Hoexter
Michael Moynihan
Miles Grant
Sean Casten
Sharon Astyk
Steph Larsen
Stephanie Paige Ogburn
Summer Rayne Oakes
Thomas Dobbs
Van Jones
Zoe Bradbury


The wheel turns against gasoline

Americans reduce gas consumption as prices continue to rise

Posted by Kit Stolz (Guest Contributor) at 3:10 PM on 04 Mar 2008

Read more about: energy | oil | consumerism | gas prices

Shocked by high gas prices? You're not alone: according to the lead story in today's Los Angeles Times, prices are at a record high.

The gravity-defying price of oil shot through another barrier Monday by briefly touching $103.95 a barrel in New York trading, the highest cost ever for black gold even after adjusting for inflation.

But the experts say it's not so much a rise in demand that is pushing up the cost, but a fall in the value of the dollar.

"I don't think it's a coincidence that the price of oil hits an all-time high around the time that the dollar hits an all-time low against the euro," said Ken Medlock, an energy studies fellow at Rice University's Baker Institute. "The amount of dollars you have to give up for a barrel of oil is going to increase because the dollar is purchasing less and less."

In response, according to an excellent story in Monday's Wall Street Journal, Americans have at last began to turn against gasoline.

The WSJ headline sounds almost epochal: "Americans Start to Curb Their Thirst for Gasoline."

It's the biggest drop in consumption in 16 years.

Today, a weakening economy is intensifying the effects of high gasoline prices, at the same time Americans are being pinched by broader inflation. In January, consumer prices were up 4.3% from a year earlier, a 16-year high, led by sharply rising food and energy costs. Even stripping out food and energy, the so-called core inflation rate was up 2.5% from the previous year, reflecting higher costs for purchases such as education and medical care.

We are beginning to see how we must change our behavior to reduce gasoline consumption. And, according to the story, we are beginning to see how those changes could endure.

The longer gasoline prices remain high, the greater the potential consumer response. A 10% rise in gasoline prices reduces consumption by just 0.6% in the short term, but it can cut demand by about 4% if sustained over 15 or so years, according to studies compiled by the Congressional Budget Office.

As consumers make major spending decisions, such as where to live and what kind of vehicle to drive, they are beginning to factor in the cost of fuel. Some are choosing smaller cars or hybrids, or are moving closer to their jobs to cut down on driving. Those changes effectively lock in lower gasoline consumption rates for the future, regardless of the state of the economy or the level of gasoline prices.

Eventually, the price of gasoline will likely fall. Somewhat. But it hasn't fallen below $2.70 a gallon since Katrina, according to the EIA, and the experts say the cost of driving will continue to climb this year. This news came as a big surprise to the prez last week.

"That's interesting ... I hadn't heard that," Bush said.

The former oilman then promised to veto a House bill to trim $18 billion in tax breaks to the oil industry.

To be fair to the president, this expectation of a continued steady rise in gas prices is new to the industry. Back in 2004 Daniel Yergin, an oft-quoted expert on this subject who leads an energy think tank in Cambridge, Mass., predicted that prices would have fallen to the $38 range by now. In a story written under his influence, a business writer for Forbes painted a gee-whiz picture of the promised solution:

Answer: capitalism's amazing resiliency. Oil prices rise -- oilmen become innovative. They work, they invest, they put their heads to the task, they apply technology, and pretty soon they'll discover how to extract oil profitably from oil sand. Or open wells in deeper water. Or scour the planet for new sources using scanners thousands of miles in space.

Hmmm ... the oil industry will use scanners in space to solve our energy problems.

Well, until that blessed day arrives, here's a tip of the hat to one of the people who aren't waiting for the oil industry, and are already looking for solutions down here on earth.

Anne Heedt, of Clovis, Calif., has been moving toward a more fuel-efficient lifestyle for the past few years. She owns a Toyota Prius hybrid but takes her bike on errands when weather permits.

"We're not always going to have the same accessibility to gasoline that we've had in past decades, so we do have to start thinking about what we're going to do over the next 50 years," said the 31-year-old Ms. Heedt, who used to work at a medical office but is between jobs.

Shrinking Gasoline Demand

Good post. The drop in U.S. gasoline consumption is terrific news, obviously. We ran a similar story yesterday on our Carbon Tax Center blog:
http://www.carbontax.org/blogarchives/2008/03/03/us-gasol ...

Let's get the numbers straight. You wrote that gas prices haven't fallen below $2.70/gal since Katrina. But EIA data show a lower national-average price in 12 of the 30 months since then. Overstating the extent of the rise in gasoline prices is a common error, and can lead to underestimating the price-elasticity of gasoline demand. That's a no-no to us carbon-tax/gas-tax advocates.

Charles www.komanoff.net

Glad to see it finally taking hold

Capitalism's amazing resiliency will most likely be in the form of extremely high mileage vehicles, from electric bikes to plug-in diesel hybrids, and much better mass transit. Forbes is parroting an obsolete oil talking point.

In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
Can hardly believe it...

...but rcently economic factors actually seem to be helpin' the environment, for once.

The recent "crisis" has halted or slowed many new subdivisons, high gas prices have cut consumption and purchasing of gas-guzzlers, and high construction costs are limitin' new coal and gas plants.

Meanwhile, economic incentives are creatin' a frenzy of new renwable energy construction.

I'm not sure how capitalism's

amazing resiliency is going to lead to mass transit.

None of these mainstream media articles dare to mention that the supply of oil may be peaking and about to go down.  They still have their heads planted firmly in the oil sands (which hopefully amazingly resilient capitalism will not amazingly develop).  Daniel Yergin is consistently wrong about his oil price predictions, and yet whenever he says that the supply of oil is no problem, the mainstream press just does their stenographer thang.

I'm not sure either

With rising energy costs, the equations will all change. High speed rail may become competitive with air travel, who knows.

In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
Mass transit

High speed rail is probably already competitive with air travel, but who's going to build out the infrastructure? Air travel has billions or trillions worth of infrastructure in place; "asset inertia" will keep it going long after it makes sense economically or ecologically.

I think it's a case where the gov't has to intervene.

www.grist.org

Ooops

That last comment is from me, not "Grist."

Victual Reality
transit use

Oil from tar sands becomes profitable not because of new technologies and processes, but because $100+/bbl makes these expensive resources profitable. That's a direct corollary to peak oil.

In the San Francisco Bay Area, I've seen a big increase in the number of people riding Caltrain every day. I'm also used to seeing bike ridership drop to almost nothing during the winter -- it dropped some this past winter, but not nearly as much as in the past.

Regarding more efficient cars  -- don't forget about Jevon's Paradox! The more efficiently we can use a resource, the more available it becomes to a wider population and the faster we'll use it up.

The government will certainly need to be involved

I'm less certain that is will need to intervene. A matter of scale and definition I suppose.

Local and federal government owns the airports, runs air traffic control, regulates and enforces airline maintenance, and on and on. Air travel would not be what it is today without the government building airports and keeping us safe.

I suspect that high speed rail would be similar. If the cost of flying becomes too high because of fuel prices, consumers will want a less expensive alternative. On the other hand, I can almost see it now, direct government subsidization of airline tickets to the tune of a buck a gallon.

In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world

The airline industry is doomed ...

...as a mass means of travel, and when prices for tickets become exorbitant, then there may be a serious push to build a serious high-speed rail network (why the airlines don't push for car fuel economy and railroadization of freight in order to preserve oil is beyond me, but there it is).

True that, Jon



In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
News Flash: Wall Street still clueless

Here's a quote from a yahoo.com business article that appeared today:

Meanwhile, demand for gasoline is falling, and several forecasters have cut their oil demand growth predictions for this year.

"There are some very disturbing things in this report on the demand side," said Andrew Lebow, senior vice president at MF Global Inc. in New York.

Wow.  Did you catch that?  The fall in demand for oil this year is "very disturbing" to the Big Boyz on Wall Street.  

In the long run, of course, it's good for the rest of us.  The Wall Street powers that be just can't imagine a world with a reduction in consumption.  Which makes me want to call up Mr. Andrew Lebow and suggest he get a job in the real world ... maybe ferrying people around downtown in one of those bicycle-driven cab things that are fashionable these days in touristy neighborhoods.  

Mr. Lebow would probably look good in a red polyester vest.

You are not logged in. Thus, you cannot post a comment. If you have an account, log in. If you don't have an account, well, by all means go make one! Meet you back here in five.
sign in
Search Gristmill
Subscribe
  • subscribe via RSSStay updated with the Gristmill RSS feed.
  • Add to My Yahoo!
  • Subscribe with Bloglines
  • Subscribe in NewsGator Online
  • Subscribe in Netvibes
  • Subscribe in Google
Using Gristmill
  • What is Gristmill?
  • Posting rules
The comments of Gristmill users reflect the opinions of those individuals only, and do not necessarily reflect the viewpoints of Grist, its staff, its board members, their psychotherapists, or their aestheticians. Got it?

Gristmill is powered by Scoop.

ADVERTISING POLICY


About Grist | Support Grist | Job Board | Archives | Grist by Email | RSS | Podcast
Gristmill Blog | In the News | Ask Umbra | Muckraker | Victual Reality | 'Tis the Season | The Grist List | The Bottom Line



Grist: Environmental News and Commentary
a beacon in the smog (tm) ©2008. Grist Magazine, Inc. All rights reserved. Gloom and doom with a sense of humor®.
Webmaster | Sitemap | Privacy Policy | Terms of Service | Trademarks