In a perfect world, an ample supply of a commodity at a low price should stimulate demand. Not so with gasoline in America. According to MarketWatch, "Even though prices at the pump are now about 45% lower than they were a year ago and significantly below $2 a gallon, 52% of Americans told Gallup that they have not gone back to their old gas-guzzling ways."
The poll indicates, as might be expected, that lower income drivers are cutting back the most.
The easy reasoning behind the drop in driving is that people will save money in a tough economy. If things were good, drivers would drive more and take advantage of falling prices.
It may not be that simple. The average American is not a boob. He understands that, over time, the amount of oil in the world is finite. Gas prices may not go back up tomorrow, but they will go back up. Getting used to using oil-based products less is good long-term thinking.
Another, less obvious, reason for cutting back on hours on the road is that a car driven less lasts longer. Buying gas may be getting less expensive, but a new car is still an investment of over $20,000 in most cases. People don't have that money. Getting another year of service out of an aging vehicle has a particularly important value in a recession.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
1-01-2009 @ 10:37AM
Louis said...
The oil companies all thought that they had the American public over a barrel (pardon the pun.)
They all thought that the American people were so attached to their big trucks and SUVs and would keep driving them no matter what the cost.
Well, the Americans have taught the oil companies and world a valuable lesson.
Did you ever hear of the Boston Tea Party?
During colonial times the British insisted on taxing tea for the Americans.
The Americans responded in kind by dumping the tea in the harbor.
The Americans are driving less because they need the money for other items and further, they should continue to drive less to send a powerful message to the oil companies. I think that more than any thing else people are learning that they cope no matter what.
So, everyone car pools and cuts back on their driving. It's actually a good thing.