Gas Price Demand Elasticity


Here is an interesting article on the Carbon Tax Blog about dropping gas usage in the US due to sustained high prices.  As I’ve said before, now that peaking oil supply has made gasoline supply inelastic, price will have to be set by marginal demand… we’re beginning to get a look at what the demand elasticity for gasoline is.But gas prices are not dropping.  US demand may actually be elastic, but world demand is not yet showing elasticity.  In large part, this is because most emerging economies and oil producing company consumers enjoy fixed price oil, courtesy of subsidies.  Those subsidies may turn out to be elastic, when it breaks the bank, but it will take a long time.

I’ve personally been cutting my driving with a Motorboard, which I tried for the first time on Saturday (after which it snowed… weather may be a factor for a month or two.)  I’ll write something about it after I’ve had a chance to use it more.

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