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High Gas Prices Not Stopping Motorists

When the price of gasoline surges, two things are practically guaranteed: motorists will bemoan the rising cost and, more tellingly, they'll drive as much as ever.

"I hate it. I hate expensive gas," Don Macklin, 71, of Kingston, Ontario, said as he pulled his Chrysler minivan into the Travelodge motel just off I-95 near Fredericksburg, Va., 400 miles away from a vacation with his wife in Myrtle Beach, S.C. "But what are you going to do? I just factor it in."

There is still a long way to go before hitting the price at which most drivers actually begin to conserve - either by purchasing more fuel efficient vehicles or driving less, according to market research and historical data.

So despite Friday's record-setting price of $1.75 per gallon of regular grade gasoline, experts said only a tiny percentage of drivers will actually cut back, and even then only marginally.

"As prices go up, people will grumble," said Dermot Gately, an economics professor at New York University who has studied the relationship between gasoline prices and demand. "But I don't think their behavior, at least in the short run, will be affected."

Gasoline demand this summer is expected to be at least as strong as it was last year, according to AAA, with more than 29 million Americans traveling by car on Memorial Day, the start of the peak driving season. For the year, U.S. gasoline demand is expected to rise 1.6 percent to more than 9 million barrels a day.

That's not to say Americans indulge their appetite for fuel without some pain.

Holly Mistine, a 25-year-old model and professional belly dancer from Los Angeles, where prices average $2.14 per gallon, said travel expenses are cutting into her earnings.

Mistine bought an SUV last year to transport her props and costumes to shows, but now that she has to fill up "at least twice a week," she wishes she'd gotten a smaller car.

Her predicament is no surprise to Ian Devers, the sales manager of Superior Toyota in Merriam, Kan.
A small percentage of the people out there actually make buying decisions based on what gas mileage is or what gas prices are," Devers said. "People do come in and talk about it, but most of it is just talk."

Industrywide statistics seem to bear that out.

In 2003, sales of new cars declined by 5.8 percent, while sales of light trucks, which include pickups, minivans and SUVs, grew by 3.5 percent, according to AutoData Corp. of Woodcliff Lake, N.J. Light trucks made up 54 percent of new vehicles sold in 2003, compared with 39 percent back in 1993.

An average price of $1.75 per gallon - a record level, according to AAA - still does not provide enough sticker shock to significantly alter driving or car-buying habits, according to a recent survey by CNW Marketing Research of Brandon, Ore., which regularly tracks such trends.

If pump prices were sustained at $1.75 per gallon for six months, only 3 percent of motorists said they would drive "somewhat less" than they do today, according to a random telephone survey of 3,981 Americans. The figure rose to 9 percent at a hypothetical level of $2.75 per gallon.

The survey also found that gasoline would have to cost $2.75 per gallon for at least six months before even 5 percent of respondents said they would "immediately" purchase a more fuel efficient vehicle.

Longer term, the annual rise in gasoline demand is expected to slow.

"The oil industry is watching carefully the development of hybrid-electric vehicle technology," said Bill Veno, a director at Cambridge Energy Research Associates, a Cambridge, Mass., based consultancy.

The expected rollout of hybrid SUVs, which will be about 15 percent more fuel efficient on highways, "is one of the greater worries of the oil industry," Veno said.

Gasoline consumption also should taper off as the U.S. population ages, Veno said, citing studies that show most people drive less once they reach their mid-40s.

In the near term, however, the Energy Department has predicted that average prices could climb above $1.80 per gallon before spring is over and analysts are warning that high oil prices and tight gasoline supplies could push pump prices above $2 this summer. (Premium gasoline already has crossed the $2 per gallon threshold in many parts of the country.)

While that would set yet another new record in nominal terms, it's still well below the cost of gasoline in 1981 when, in today's dollars, prices climbed above $2.90 a gallon, according to government statistics.

That is a crucial factor, analysts said, in understanding why today's prices, while high by several measures, haven't touched off the kind of fuel conservation measures that were triggered in the 1980s, when people traded in their gas guzzlers and the auto industry began building more efficient cars.

"Gas expenditures as a percentage of disposable income is much lower than it was 20 years ago," said Gately, the NYU economist. Further, the cost of fuel per mile declined as automobile engines, regardless of what size car they're in, became more efficient.

This made it seem cheap again for Americans to fuel-up big cars. Until recently.

"I made the dumb mistake of getting a Ford Ranger for the extra power," said 68-year-old Doug Craig of Spotsylvania County, Va., after filling up the tank of his new 6-cylinder truck at a Wal-Mart gas station.

"To rub salt in the wound," Craig said while shelling out $1.58 per gallon, "the kid I sold my Subaru to drove over the other day to thank me."

--- original poster's note ---
Poster's Note: As we get over Hubbert's peak, supply elasticity wanes. Based on this article, gasoline demand isn't very elastic either.

We've got the conservation technology....we aint buying it. Ever wonder how all these past societies fell so fast.....? Stay tuned.

Editorial Notes: Americans complaining about petrol at A$0.61 per litre(US$1.75 per gallon)!! They ain't seen nothing yet.

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