Part of the Bay Area News Group

market forces not just gas, eh?

By enelson
Monday, June 25th, 2007 at 6:23 pm in driving.

pavlovian-response.bmp

Some of you doubted me when I said in April we had reached the elasticity conversion point when it came to gas prices, i.e., the point at which high prices make us consume less in spite of our historic tendency to ignore them.

Among the comments were these:

murphstahoe Says:

I’m not buying it. While I can see it leveling off, I don’t think we’ve come anywhere close to the knee of the curve where price increases would correlate to drops in demand based on basic microeconomics. I predict the real “pain” that would get most Californians out of their car is $7…

Frequent Amtrak Rider Says:

I agree with the poster above, except I’d put the cost somewhere closer to $5. The good news is that the sales of SUVs are down.

Well you can all get high on ethanol fumes, because I am once again proven right. I know this because I read it in the newspaper. According to today’s front-page story by our Sacramento correspondent Steve Geissinger,

Californians purchased about 15.82 billion gallons last year, down from nearly 15.94 billion gallons the previous year, a state Board of Equalization report shows. Previously, consumption had been increasing by hundreds of millions of gallons annually.

Motorists also have bought less in most of the last 12 months on record, from March 2006 to February 2007, than in the corresponding months of the previous year.

The average pump price in February was $2.71 a gallon, a 17-cent increase from the same month last year.

And notice, after the drop in demand is recorded, the price is mellowing out, such that on the way to work today, I noticed a Valero station with a cash price of just under $3 per.

Coincidence?

Drawing from http://webteam.unb.ca/mehmet.html.

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