Surveys show that gasoline prices are starting to weigh on consumers' psyches, as well as their budgets, but will the recent price surge propel permanent transportation changes in the nation?
Economist Glen Langan thinks it will, with the pivotal level being prices well over $3 per gallon gasoline. Initially, economists thought the $3 per gallon threshold would compel consumers to cut back consumption, Langan said. This didn't occur, despite gasoline's six to nine month long plateau over $3. A few months and 50-60 cents later, consumers have cut back, and Langan says the permanence of gasoline's stratospheric level is the reason.
Gasoline price psychology
"The cutback is a combination of the old and the new price, but it's mostly a reaction to the old $3 gasoline. Consumers would have cut back then, but they didn't because they concluded that it was temporary, a summer price," Langan said. "But after prices didn't drop and continued to increase early this year, well before the new summer driving season, consumers have concluded that the $3 or higher price for gasoline is here to stay, so they're cutting back accordingly. From a budget standpoint, they're making the right choice."
Why do we have a weak dollar?
Holiday hiring slow for retailers
Closing Bell: What sell-off? (AIG, ABK, EPR, MBI, JAVA, ORCL, ERTS)
