Capital Commerce

Will Lower Gas Prices Change Our Behavior?

By James Pethokoukis

Posted: August 13, 2008

James Hamilton expects gasoline demand destruction to continue despite lower prices:

Although the price of gasoline today is less than it was a few weeks ago, it's still much higher than it had been at the time you purchased your last car. As consumers replace older models, they're invariably going to continue to substitute into more fuel-efficient vehicles even if oil prices continue to decline. In addition, there was a mentality in 2005 that what looked like high gasoline prices at the time ($3 a gallon) were only temporary. I expect an opposite perception could have set in today—even if gasoline prices go lower for a few months, consumers know they could go back up and nobody wants to be permanently stuck owing the big gasoline bills they remember from this summer.

Pain Lingers at Pump

USA Today reports that Americans are drove 12.2 billion less miles this June than last year at the same time. The drop in price at the pump is welcomed, but not enough to get (most) people ready to buy a shiny new SUV or pickup. The economy is still in great flux, and the other large issues of housing and credit still loom large.

A. of CA @ Aug 14, 2008 01:36:22 AM

What do you mean, "Will..."?

Gas prices HAVE ALREADY changed our behavior. Based on sales figures for SUV's and large trucks, you couldn't GIVE one away to someone conscious of the costs and not needing to move large amounts of people or equipment on a fairly regular basis. You can't sell the 'off road', heavy bass beat, driving excitement to go places you aren't ever going to go BS of a 4 wheel drive SUV as a family car anymore.

As a normal single-person or family use vehicle, testosterone replacement therapy SUV's and large trucks won't cut it with today's (and the future's) high gas prices. People are looking to save money in the long run. Although weekend wannabe SUV warriors may have loved thinking they were nine feet tall, three feet wide and completely covered with hair while cruising around in their suburban assault vehicles, reality has set in. They have already started seeing themselves as a penniless Sasquatch stuck with a gas guzzler they don't absolutely need and can't afford to drive.

High gas prices have created a lot of shaved apes out there who now have less hair on their bodies but more brains in their heads. Given that painful education, and the likelihood that gas prices will continue to trend upward, going back to the bad old days is not going to happen without some major improvements in the costs of energy. And when it comes to gasoline, that will NOT happen.

Fatesrider of CA @ Aug 13, 2008 20:38:55 PM

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Capital Commerce

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