Sunday, September 25, 2005

Even Short Run Gas Demand Curves Slope Down!

The New York Times has been doing some high frequency econometrics to study how Americans have responded to higher gasoline prices. “For three straight weeks, Americans have been buying less gasoline than they did a year ago. Consumption is dropping at a rate not seen since drivers were waiting in gas lines back in the early 1980's. And people are turning to mass transit in record numbers in some cities.” (Go Ahead and Drive Less, if You Can By DANNY HAKIM and JEREMY W. PETERS)

But Americans consumed an average of 8.8 million barrels of gas a day for the week ending Sept. 16, down from 9.4 million the week before Hurricane Katrina struck New Orleans and roughly 200,000 fewer barrels per day than in mid-September last year. (Nice Double Difference by the Times!)

The article continues: “So how much can Americans cut back on their driving? How much time behind the wheel is discretionary? Consider that the average American household used its cars and trucks for 496 shopping trips in 2001, according to an exhaustive survey of 160,000 Americans conducted by the Transportation Department. Trips were 7.02 miles in length, on average, for a total of 3,482 miles per household per year. That much driving could almost get you from New York to Juneau, Alaska, give or take a few hundred miles.
That's a lot farther than in 1990, when the average household's shopping trips could only get you from New York to Denver. Part of the difference stems from the fact that the length of an average shopping trip was 5.1 miles in 1990. Blame greater suburban sprawl for longer trips these days.”


1. How have drivers ages 16 to 30 and 65+ responded to the oil price increase? I would predict that they reduced their driving trips by more than people ages 31 to 65.
2. The article argues that cities with good public transit systems such as Boston, San Francisco and Washington DC have seen increased public transit use
3. Food can be stored. People may be purchasing more food at the supermarket and making fewer trips there.
4. Many households have more than one car. To economize, households may actually be driving together and doing chores together that they used to do separately when gas was cheaper.
5. It will be interesting to see if other discretionary margins like restaurants and movies in suburban malls report lower sales revenue as “cheap” suburbanites stop driving there.
6. I would hope that some public health official is doing a study on whether people in medium density cities are now walking more. Has obesity increased because oil prices fell?