The nifty image to the right, taken from today’s issue of The New York Times, says a lot: gas prices, coupled with recession jitters, have ushered in a sea change in the vehicle market. Fuel efficient cars are flying off the lot, while cars and trucks with big tanks are, well, tanking.
Hybrids aren’t the only winner in this auto race. High-mileage compacts—the Honda Fit, Toyota Yaris, and Ford Focus among them—are experiencing a substantial sales boost too.
But to me, the most fascinating part of this article is this: recent trends have completely upended the “conventional wisdom” about how consumers respond to high gas prices.
You see, It used to be pretty common to read press stories that implied that drivers were simply unable, or perhaps unwilling, to adjust their transportation habits in the face of higher prices. As gas prices rose, the stories went, consumers were doing almost nothing in response, other than tightening their belts in other areas.
In the Northwest at least, this has been false for a while. Gas consumption, measured per capita, has been going down for the better part of a decade. Still, the idea that gas prices were having no effect on driving seemed to be pretty much ubiquitous.
But now, look at what the Times says:
How the downsizing of America’s vehicle fleet will affect fuel consumption is still largely unknown. When gas prices rise, as they are now, many drivers simply drive less to save money. [Emphasis added.]
That’s right—the article takes the link between rising prices and driving for granted. They don’t even bother to source it—meaning that by the Times‘ standards, it’s basically self-evident.
I think it’s another sign that we’ve reached something of a tipping point: people are starting to understand that many families do, in fact, have some flexibility in how much they drive, and how much gas they use. And as gas prices near $4 per gallon, people are figuring out ways of cutting back.
Of course, “price elasticity ” (as this effect is called) has been the conventional wisdom among economists since the days of Adam Smith. So it’s nice to see the idea finally getting a little ink for a change.