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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: neolib who wrote (228974)	4/12/2005 6:02:18 PM
From: i-node	Read Replies (2) \| Respond to of 1572707

>>> Once price pushes the bulk of consumers past the hysteresis step, then demand changes. It is generally not the nice smooth curve they show in economics textbooks. Exactly. I'm convinced that $6/gallon gas will get people off their butts toward conservation. We recently bought a new car for my wife, who was keenly interested in a hybrid, as was I. But when we looked at the economics of it, it simply didn't make sense. Obviously, as purchases ramp up economies of scale will take over and bring prices down a bit. But ultimately, the price of gas is going to be most influential I believe. While I think government can and should promote conservation of energy, no amount of government intervention will do what a good pop is gas prices will. The "government should make conservation happen" crowd should take a look at the late 70s and early 80s, when we had such initiatives as the "Residential Energy Credit" -- nice, but a tiny fraction of 1% of taxpayers purchased qualifying assets -- and I'd wager these were influenced less by the credit and more by their own conservationist attitudes.

To: neolib who wrote (228974)	4/12/2005 6:29:44 PM
From: Tenchusatsu	Read Replies (2) \| Respond to of 1572707

David and Neolib, Supply/demand curves are too simplistic wrt to status quo. There needs to be some sort of hysteresis function about the familiar range to more correctly describe consumer behavior. Once price pushes the bulk of consumers past the hysteresis step, then demand changes. It is generally not the nice smooth curve they show in economics textbooks. I'm sure you guys would prefer clear-cut scenarios, but the rise in gas prices already has an effect on many people's habits. A few more people are carpooling than before. Those deciding between an SUV and a minivan or station-wagon now tilting a little bit toward the latter. Families no longer making quick trips to the supermarket just to get milk. More people putting off road trips in favor of vacations closer to home. ocregister.com (requires free registration to view) Meanwhile, I view technologies like hybrid vehicles as forming a ceiling on potential gas prices hikes. For instance, let's say the Accord hybrid gets 26 MPG vs. the regular Accord at 22 MPG. (Consumer Reports puts their respective gas mileages at 25 and 23, but I'll widen the gap to make a point.) The price difference is $2,000, I think, which means at $2/gal, driving 15K miles per year, it will take 10 years before the hybrid pays for itself in terms of gas saved. So right now, owning a hybrid doesn't make that much economic sense. But what happens when gas goes to $3/gal? It will take 7 years before the hybrid pays for itself. $4/gal? 5 years. By then, there will be such a huge demand for hybrids that every new car out there will include a hybrid version. Demand for oil will drop significantly, which will put tremendous downward pressure on oil prices. This downward pressure will continue until either gas is relatively cheap again or every car on the road has been hybridized. The first scenario will hold off the inevitable, but the second will be the only thing that can make gas break the $4/gal ceiling. And that ceiling is a lot lower than the $6/gallon ceiling that might force someone like yourself to drive less. Hopefully before then, we'll run into the next cool piece of technology that helps us conserve even more. Tenchusatsu

To: neolib who wrote (228974)	4/12/2005 7:07:11 PM
From: Road Walker	Read Replies (1) \| Respond to of 1572707

re: Supply/demand curves are too simplistic wrt to status quo. There needs to be some sort of hysteresis function about the familiar range to more correctly describe consumer behavior. Once price pushes the bulk of consumers past the hysteresis step, then demand changes. It is generally not the nice smooth curve they show in economics textbooks. Yes, but... There are a lot of folks that are earning less than $10 an hour and commute an hour to work. And they have kids they have to drive to baseball practice. What's happening to those folks? They can't afford a new hybrid. So they cut down on driving as much as they can (5%?). And they cut their spending in other areas. So these folks can continue to invest their discretionary dollars to add to XOM's $18.5 Billion cash hoard and the Saudi royal family, or we can figure a way to lower consumption and subsequent prices. Right now, relative dollars spent on gas are inefficient; they literally go up in smoke. A driver of an SUV that get's 15 MPG takes the same amount of time to get from point A to point B as a driver of a car that gets 35 MPG, but with double the cost to our economy. It will take tax credits and tax disincentives, and patriotic motivation. But there is too much at stake to leave it to the "free" market... the "free" market is as much a myth as the "free lunch". John