183 comments on Some reprieve in Jan VMT
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183 comments on Some reprieve in Jan VMT
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GAIA Host Collective
I write this singla data point (January 2006 VMT) off as meaningless.
However, earlier months and longer term averages, show little elasticity of demand for our beloved autos in the US, regardless of oil price.
I did hear a radio commerical in Phoenix for some developer of FAR exurbia (US Ranch ?) that was extolling the development that they just sold out "at the foot of the Granite Mountains" (whereever that is) and then talked about the "new plateau of elegant living" that was "closer to Phoenix".
So the worst villians are "hedging their bets". Not nearly enough though.
You are 100% that one month's figures mean nothing. However, as I look at the 12 month moving average graph, it seems to me that number of miles travelled during the most recent 12 months for which data is available has indeed levelled off, most likely in response to higher gasoline prices.
Although demand for gasoline is highly price inelastic in the short run, it has a much greater eleasticity over time. Nobody can know exactly what the long-run price elasticity of demand for gasoline in the U.S. is, but in all probability it increases not only over time but also at higher levels of price. Thus gasoline may be highly price inelastic over a price range of, say $1.50 to $3.00 per gallon, be somewhat more elastic from $3 to $5 per gallon, and possibly about unitary elasticity (over a period of several years) at a price of $5 to $10 per gallon.
In any case, the law of demand applies: Other things staying the same, a lower quantity will be demanded (purchased) at a higher price than at a lower price. In other words, the demand curve for gasoline is not a vertical line.
The issue of income elasticity of demand is a "whole 'nother beast" and there is no need to go there, except to observe in passing that as nominal national income increases, the demand (i.e. the whole demand curve) for gasoline increases.
Simple demand reduction due to customer preference and substitution (double price of green beans and see demand plummet immediately) is sadly lacking in gasoline/oil.
Double price of gasoline and see demand grow by 0.1% instead of ~1.7% y=o=y. NOT GOOD :-(