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Outside Asylum Take a walk, smell the roses. Any topic is fine, save people bashing. |
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Outside Asylum Take a walk, smell the roses. Any topic is fine, save people bashing. |
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In Reply to: Gas Prices posted by Mike K on April 23, 2007 at 07:35:45:
People react to two things in that situation: price shocks (which this isn't) and high costs as a proportion of their overall net income (which this also isn't).Gasoline costs in the USA right now are about 17 cents per mile. The overall cost of car ownership is about 50 cents per mile. That means driving a car costs around $6000 per year, with only $2000 of that being fuel costs. If fuel prices were to double, that would bring the cost of a year's gasoline to $4000 (up 100%) and the cost of owning a car to $8000 (up only 33%). Most Americans have enough discretionary income to budget for that. They might not supersize their Happy Meals as often, but hey, everyone has to make sacrifices...
Price shocks are what would suppress demand in the USA. A price rise from $3.50 to $7.00 a gallon over the course of a year wouldn't do much of anything to demand. Making that jump over a month would cause a lot of people to stop driving - but just for psychological reasons, not financial ones.
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Follow Ups
- Gasoline demand is quite price inelastic - GliderGuider 04/23/0710:42:50 04/23/07 (1)
- If you are right, GG - and I don't think so - a carbon tax won't work. nt - Jim Pearce 13:33:11 04/23/07 (0)
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