Gas-guzzlers slow to change their habits

Even as gasoline prices skyrocket, American consumers’ driving habits aren’t changing much, writes automotive consultant Glenn Mercer on the Automotive X Prize blog.

Mercer, a senior consultant for the giant McKinsey & Co., suggests drivers are less flexible than they were the last time gasoline was this expensive, back when it set price records in 1981. He cites a paper (PDF) by researchers at the University of California at Davis:

The paper lays out a few hypotheses, from the increasing prevalence of urban sprawl (if you now live 20 miles further from work than you did 30 years ago, what choice do you have to cut back much on driving?), to rising incomes (maybe gasoline is a smaller part of the household budget today), or to — ironically — better fuel-economy performance in cars. (When gas doubles and you are driving a 6 MPG Olds Tornado you feel a lot more pain than if you’re in a 35 MPG Civic.)

They found that the price elasticity of gasoline — economics jargon for how willing and quick consumers are to change their habits in response to price hikes and drops — is less than half now what it was as prices climbed in the late 1970s.

Lots more people are locked into their lifestyles. In her book Oil on the Brain, Lisa Margonelli cites research saying that Americans won’t really start to change their behaviour till gas hits about $4 a gallon. The Wall Street Journal‘s energy blog puts today’s national-average price at $3.21. (Within tickling distance of the inflation-adjusted record price of $3.23 US a gallon, by the way.)

Unsurprisingly, Mercer echoes McKinsey’s call of last week for energy-efficiency standards, though I don’t see the need. Gas’ll get to $4 a gallon soon enough, apparently with or without working the external costs of carbon-dioxide emissions into the price.


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