What price will change driving?
It’s hard to have a conversation these days without someone bringing up the price of gas.
Monday’s national average of $3.97 for a gallon of regular is up 25 percent from a year ago. AAA is reporting a 15 percent increase in “out-of-gas” service calls as drivers try to avoid another costly fill-up by running on fumes. Car rental companies can’t keep compacts in stock and are pushing free SUV upgrades on travelers who don’t want them. New auto sales have declined 10 percent the past year, and market prices for used trucks and SUVs have dropped 15 percent across the board.
As $4 gas becomes the new norm, Americans are suddenly paying attention to the cost of driving as never before. Since 1998 the early June pump price for regular gas in St. Cloud has risen from $1.10 to $3.83. Corrected for inflation that’s a hefty 275 percent bump.
Anyone paying attention during that time would have easily noted that the price of gas was rising fairly steadily, and certainly should have noted the large jumps in 2000, 2004 and 2006, each of which saw June-June increases of 30 percent or greater.
But how many conversations about carpooling, buying smaller cars or switching to ethanol do you remember from the early summers of those years?
What we saw
When local gas prices increased 42 percent between June 2005 and June 2006 there were few car ads in the paper touting “HIGH MPG!” or recent model crew cab diesel pickups parked along the highway with “make offer” signs on the windows. But we’re seeing both now.
Some analysts have suggested the $4 threshold represents a psychological barrier that consumers just weren’t prepared to deal with, particularly those of us who remember $1 gas not that long ago.
But if we go back to the energy crisis of 1979, similar behavioral patterns appear. As prices skyrocketed and stations literally ran out of gas people bought more efficient cars, drove less, carpooled more and complained a lot.
The big psychological threshold for gas prices then was $2 rather than $4. In a Gallup Poll that spring only 26 percent said they would continue to drive to work if gas hit that mark.
Twenty-eight percent of respondents in another pool had to “drive around to find a station that had gasoline available” while another 18 percent drove less because they simply could not find gas to buy.
Conservation
The pain may not have been that bad though, as other surveys found 38 percent felt it would be “not at all difficult” to reduce their miles traveled by one quarter and fully 40 percent supported a law requiring people to reduce their driving by that much as a way to conserve gas.
But when the supply of oil increased and the price of gas dropped 47 percent between 1981 and the low point in 1988 such concerns were largely forgotten.
What’s different today is that there’s much less flexibility in the world supply to create another oil glut and push prices down in the United States.
We now import more than twice as much oil as we did in 1985, but the oil reserves of many exporting nations are producing far less than they did just a decade ago.
The big gains in automotive fuel efficiency realized in the wake of the energy crises of the 1970s tapered off in the 1990s as prices stabilized, Congress failed to follow through on conservation commitments, and consumers flocked to SUVs and minivans.
More people, more cars, more driving, less crude oil — the basic economics of supply and demand should tell us that $4 gas is not a fluke, but the first step toward a more expensive future.
We often hear anecdotes about $10 per gallon gas in Europe these days, usually presented as cautionary tales or “you think things are bad here” human interest stories. But at the same rate of increase we experienced in St. Cloud the past five years — when gas rose from $1.39 to $3.83 at the pump — we can reasonably expect to see $10 gas here by 2011.
When that happens will we be shocked and pretend it came without warning? Or is it finally time we take a serious look at our driving habits and begin planning for a future without cheap gas?
