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.
If you work for the State of Washington in Olympia and ride the bus to work 8 times a month, you can get a “pass” that enables you to ride Intercity Transit FREE anytime. In my agency, Washington State Patrol, we also get a cash bonus for doing so. That’s quite an inducement to get out of your car and onto public transport
The essential question is not whether there is “price elasticity” but whether this “elasticity” will be enough to prevent disaster. Whether you care about sustainability, peak oil, climate change, pollution or national security the measure of success is quick and significant cut in total fossil fuel consumption. It is not happening folks.It doesn’t matter that some people are reducing consumption. It doesn’t matter what the NY Times thinks. What matters is how much gasoline is bought and burned.As your other articles point out, gas prices have more than tripled in last few years but total gasoline consumption—and total greenhouse gases from it—have not dropped even a tiny bit. Zero. Zip. We’ve added $3 per gallon to gas prices and we are using the same amount. Surely this has some policy implications??How high will gas prices need to go before we get the needed 80% cut? How about ANY cut? Can the rest of the economy and world food system survive this price? Or will they “snap” because the “elasticity” of a critical mass of fossil fuel consumers is too much for the rest to bear.If you look at another transportation area, aviation, it is even worse. jet fuel has quadrupled in price in the last decade, yet consumption of jet fuel has risen 6% per year with no decline at all. A massive price run up in price leads to a near doubling in consumption—and emissions.So what price do we need for jet fuel to cut total usage? So far we are no where near that price. Aviation is the fastest growing source of emissions on the planet and at current rates will consume 100% of all available emissions allowance for all of human activity in the wealthy nations. Surely understanding “elasticity” in this sector is critical.Likewise ALL global fossil fuel emissions continue to rise dramatically despite years of increasing prices.These are not “predictions” from complex “economic models”…this is reality as actually played out by human beings.Even this latest “good news” about US car sales is more full of bleak omens than hope. Even at $4/gallon facing Americans, a full 80% of new vehicles being purchased are “gas guzzlers” by any standard. Cars and trucks last for a long time. We are still facing at least a decade, and probably much longer, in which the vast majority of vehicles are gas guzzling disasters that will need to operate in $6 or $10/gallon gas. (Hint is $6.50/gallon in EU already).Bottom line is that proven “elasticity” response so far has been totally, pathetically, hopelessly inadequate to the required outcome for any hope at a sustainable and survivable future. What baffles me why there isn’t any discussion on Sightline or other eco-sustainability sites about this. It seems everyone is crossing their fingers and hoping for the “magic” tipping price point to arrive someday and shift everything dramatically and quickly.I’d feel a lot better if alternate scenarios were at least discussed. Right now, all our eggs are in one solution basket that reality has shown to be a total failure so far.Thoughts anyone?
Hi Barry,That’s very interesting information. Can you provide your sources for fuel consumption and vehicle fleet %ages?For US transportation, I suspect that consumption will go down, all other things being equal, as the vehicle fleet shifts in composition. That would take a few years, but this year SUV sales were down 32. Another influence on transportation-related consumption would be vehicle miles driven, if anyone has those stats.Transportation in India and China may be more challenging. I think the limiting factor has been affordability of vehicles, rather than marginal trip costs (fuel prices). So with the Tata Nano, expect more consumption in India. That will affect the global consumption, which is what matters for global warming.