Thursday, May 8, 2008

The Effects of Higher Gas Prices

While driving for about 11 hours to bring my son home from university, I was struck by the fact that high gas prices don’t seem to have reduced the number of cars on the road very noticeably. You can’t tell much from one day, but I haven’t noticed much difference in day-to-day driving either.

Gas prices have risen about 50% in my area over the last year and a half. Some days I imagine that there are fewer cars on the road, but other days I’m not so sure. It’s likely that more people are taking the bus, but the difference hasn’t been enough to shorten the duration of my commutes perceptibly.

Either demand for gasoline is less elastic than I would have guessed, or the effect is delayed. Perhaps, even if gas prices were to stabilize at current levels, demand would continue to drop as people feel the cumulative pain of paying high prices for a long time.

I had hoped that a small benefit of rising gas prices would be less congested roads. Has anyone else noticed a difference?

4 comments:

  1. I have noticed that the percentage cost difference for premium gas seems lower these days, so I actually add some "high test" occasioanlly to my car figuring for 10 cents more a liter, it might help clean up some of the "knocking" in my car.

    --C8j

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  2. If your car doesn't specifically require it, then "high test" is a complete waste of money. If your car does require it, then use it all the time else the detonation is slowly going to wreck your engine. If your car is knocking and it doesn't require "high test" then take it into your mechanic for a tuneup. Knock sensors retarding the timing only go so far and are not meant to compensate for burning the wrong octane fuel all the time.

    On the original topic, yes, gasoline demand is relatively inelastic. Many people see their car as equating to their personal freedom and it will be one of the last things they will give up in their lives for the sake of money. But you're right in that the reaction is probably delayed a bit, as people need a few months to realize the impact on their budget and start to mentally prepare themselves about thinking of alternatives to just jumping in the car on a whim.

    Here in Ottawa, OC Transpo is claiming that ridership is way up due to gas prices. I haven't noticed reduced traffic other than the normal summer rush hour reduction that Ottawa experiences every year.

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  3. I have not noticed a difference whatsoever. I crawled back from Toronto yesterday at about 40km/h at 3:30pm.

    I think it will take higher prices to really make things change. As others have said, cars=freedom=necessities of life, staying off the roads more won't come until people notice a signficant impact ont heir finance, this could take $2/L.

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  4. I noticed that more people are driving (slightly) slower on the 401 these days, even if it is a minor difference (from about 120-130 km/h to 110-120 km/h). So some of those tips for saving gas must be sinking in...

    However, I haven't really noticed a decrease in traffic volume.

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