The future of gasoline
Date posted: October 10, 2012
One of the most watched of prices is that of gasoline. Although gas prices don’t change in a straight line, the trend has appeared to be up. Should we expect more of the same in the future? N.C. State University economist Mike Walden responds.
“And really part of this depends … on how people are going to change their behavior in terms of using gasoline as a fuel. It’s very hard for drivers to alter their driving patterns in a short period of time. That’s one reason why people get so upset when they see gas prices go up, because they say, ‘Well I don’t have any choice. I’ve got to pay it. I’ve got to get to work. I’ve got to take the kids to school, day care, got to shop, et cetera.’
“But over the long run people are able to adjust. They may buy more fuel efficient vehicles. They may carpool. They may change their trips, coordinate their trips, et cetera. And, indeed, this is where we’ve actually seen dramatic changes. I don’t think most people realize this, but in the last four years our purchases of gasoline collectively in the country have gone down 7 percent. That’s a big, big change.
“For the last 50 years, we’ve been buying year after year more gasoline. The last four years we’ve bought less. So, you don’t really want to extrapolate into the future and say, ‘Well, we’re just going to have to keep paying those higher prices,’ because people will change their behavior. And the important thing here is that people start buying less gasoline as they have been using less gasoline, doing alternatives that will, in economics lingo, reduce demand and will send prices ultimately down.
“Now don’t look for gas going back to a dollar a gallon. But I don’t think it’s a sure bet to say that gasoline prices are going to continue to go up.”
Category: Economic Perspective