Gas Prices

Macauley Lukenda

Mr. Reuter

Economics

15 October 2014

Gas Prices

When we really think about how much we drive in our daily lives, the miles add up. According to the U.S. Department of Transportation 16-19 year old children drive an average of 7,624 miles per day with that average only increasing as we get older. But does this mean that the gasoline that we have to put in our cars to get from place to place is inelastic? As the price of gas continues to increase, does this mean we will still purchase the gas? Or is there some type of cap where the higher the price the less consumers there will be?

Over the last couple years, gas prices have gone down a rocky road of continuous increases and decreases on price, and the debate of whether or not gas is inelastic or elastic has followed this same rocky trend.

Driving in most of our lives is very important. Not just as a sense of pride, but it is also a necessity to get from one place to the other for work, school, or extracurricular activities, and the availability of substitutes for driving is limited. Some economist believe that as the price of gas increases, the higher the demand for public transportation increases meaning that gasoline is a luxury or very elastic. While other economist believe that as the price of gasoline increases, people no longer care. Gas becomes a necessity that no matter the price or change over time, people will continue to fill up their cars, making gasoline an inelastic good. Yet, Most people continue to believe that gas prices are too high even though the price is similar to a year ago. According to a survey done by AAA NewsRoom:

40 percent believe gas is too high when the price reaches $3.00 per gallon
50 percent believe gas is too high when the price reaches $3.30 per gallon
65 percent believe gas is too high when the price reaches $3.50 per gallon
91 percent believe gas is too high when the price reaches $4.00 per gallon

AAA NewsRoom claims in an article called “High Gas Prices No Longer Fueling a Decline in American Driving” that just as the title states, people no longer take into consideration the price of gas when driving more. “Americans have grown significantly less likely to change their driving habits or lifestyle to offset gas prices, according to a new survey by AAA. Only half of U.S. adults (53 percent) are doing something to offset gas prices, which is about 15 percent less than in spring 2013 (Green).” The article goes on to say how roughly half of Americans say they are changing their driving habits or lifestyle to offset gas prices. Those doing so report:

Combining errands or trips: 85 percent
Driving less: 84 percent
Reducing shopping or dining out: 68 percent
Delaying major purchases: 52 percent
Driving a more fuel-efficient vehicle: 49 percent
Putting aside less money for savings: 42 percent
Working closer to home: 41 percent
Carpooling: 30 percent
Using public transportation more regularly: 17 percent
Other: 15 percent

While this analysis over the last couple of years and peoples reaction to price increases makes sense, others disagree with this saying that high gas prices do decrease the number of drivers on the road. Lloyd Alter writes an article on a news website called Treehugger showing this correlation between less drivers when gas is more expensive. He writes “Your electricity. Your home heating. Gas for your car. You can cut a lot from your household budget, but everyone needs to heat their home, and keep the lights on but you can commute to work” (Alter). He goes on to talk about how no matter the area, if gas is too expensive, people will not purchase. Alter states that a study was done where “Every 10 percent increase in fuel costs led to an increase in bus ridership of up to 4 percent, and a spike in rail travel of up to 8 percent. These results suggest a "significant untapped potential" for transit ridership. In other words, a significant part of America's love for the automobile may only be its desire for inexpensive transportation” (Alter).

The debate of whether or not gas prices affect the demand of gas and the willingness to drive is an ever going debate that will forever keep changing with the ideas and results of different studies. But, what do you think? When gas prices are higher, do you ride the bus more, carpool, go shopping less or attend less sporting events where you have to drive? In your own life, when gas prices increase, does your demand for gas also decrease?

Works Cited

"Average Annual Miles per Driver by Age Group." Average Annual Miles per Driver by Age Group. N.p., n.d. Web. 15 Oct. 2014. <https://www.fhwa.dot.gov/ohim/onh00/bar8

"Historical Price Charts." Historical Gas Price Charts. N.p., n.d. Web. 13 Oct. 2014. <http://www.gasbuddy.com/gb_retail_price

"High Gas Prices No Longer Fueling a Decline in American Driving | AAA NewsRoom." AAA NewsRoom. N.p., n.d. Web. 15 Oct. 2014. <http://newsroom.aaa.com/2014/04/high-gas-prices-no-longer-fueling-a-decline-in-american-driving/>.

"Study Shows That High Gas Prices Do Reduce Driving, Encourage Use of Alternatives." TreeHugger. N.p., n.d. Web. 15 Oct. 2014. <http://www.treehugger.com/economics/study-shows-high-gas-prices-do-reduce-driving-encourage-use-alternatives.html>.