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Politics : Politics for Pros- moderated
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From: LindyBill4/26/2005 1:21:52 PM
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Speaking of Gas Guzzlers
dynamist.com

In his Forbes column, Peter Huber makes the provocative argument that rising oil prices have little effect on consumer behavior, in part because gas taxes, which don't rise and fall with oil prices, make up such a large part of the price of gasoline. His conclusion:

"All of these factors collapse into a single economic metric: The demand elasticity for crude is very low among the ordinary drivers whose behavior is most reviled by people who think they know better. In the short term low elasticity means consumers can't easily change their habits--they are stuck with the car engine and the commuting pattern they had yesterday. In the long term it means that when you buy a car, and the house you've always wanted, the capital costs you are incurring are so large that alongside them the oil is almost too cheap to meter."

I'm not entirely convinced. There's a lot of opportunity for small adjustments, since the vast majority of cars on the road at any given time are there for optional trips. Commuting isn't the only reason people drive. You can save a lot of gas by combining errands more efficiently, walking for short distances, or even staying home. But Peter's column is definitely worth a read.

Maybe it's my imagination, but the traffic in L.A. seems to be getting less horrible as gas prices get closer to $3.00 a gallon.
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