Macauley Lukenda
Mr. Reuter
Economics
15 October 2014
Gas Prices
When we really think about how much we drive in our daily lives, the miles add up. According to the U.S. Department of Transportation 16-19 year old children drive an average of 7,624 miles per day with that average only increasing as we get older. But does this mean that the gasoline that we have to put in our cars to get from place to place is inelastic? As the price of gas continues to increase, does this mean we will still purchase the gas? Or is there some type of cap where the higher the price the less consumers there will be?
Over the last couple years, gas prices have gone down a rocky road of continuous increases and decreases on price, and the debate of whether or not gas is inelastic or elastic has followed this same rocky trend.
Driving in most of our lives is very important. Not just as a sense of pride, but it is also a necessity to get from one place to the other for work, school, or extracurricular activities, and the availability of substitutes for driving is limited. Some economist believe that as the price of gas increases, the higher the demand for public transportation increases meaning that gasoline is a luxury or very elastic. While other economist believe that as the price of gasoline increases, people no longer care. Gas becomes a necessity that no matter the price or change over time, people will continue to fill up their cars, making gasoline an inelastic good. Yet, Most people continue to believe that gas prices are too high even though the price is similar to a year ago. According to a survey done by AAA NewsRoom:
- 40 percent believe gas is too high when the price reaches $3.00 per gallon
- 50 percent believe gas is too high when the price reaches $3.30 per gallon
- 65 percent believe gas is too high when the price reaches $3.50 per gallon
- 91 percent believe gas is too high when the price reaches $4.00 per gallon
AAA NewsRoom claims in an article called “High Gas Prices No Longer Fueling a Decline in American Driving” that just as the title states, people no longer take into consideration the price of gas when driving more. “Americans have grown significantly less likely to change their driving habits or lifestyle to offset gas prices, according to a new survey by AAA. Only half of U.S. adults (53 percent) are doing something to offset gas prices, which is about 15 percent less than in spring 2013 (Green).” The article goes on to say how roughly half of Americans say they are changing their driving habits or lifestyle to offset gas prices. Those doing so report:
- Combining errands or trips: 85 percent
- Driving less: 84 percent
- Reducing shopping or dining out: 68 percent
- Delaying major purchases: 52 percent
- Driving a more fuel-efficient vehicle: 49 percent
- Putting aside less money for savings: 42 percent
- Working closer to home: 41 percent
- Carpooling: 30 percent
- Using public transportation more regularly: 17 percent
- Other: 15 percent
While this analysis over the last couple of years and peoples reaction to price increases makes sense, others disagree with this saying that high gas prices do decrease the number of drivers on the road. Lloyd Alter writes an article on a news website called Treehugger showing this correlation between less drivers when gas is more expensive. He writes “Your electricity. Your home heating. Gas for your car. You can cut a lot from your household budget, but everyone needs to heat their home, and keep the lights on but you can commute to work” (Alter). He goes on to talk about how no matter the area, if gas is too expensive, people will not purchase. Alter states that a study was done where “Every 10 percent increase in fuel costs led to an increase in bus ridership of up to 4 percent, and a spike in rail travel of up to 8 percent. These results suggest a "significant untapped potential" for transit ridership. In other words, a significant part of America's love for the automobile may only be its desire for inexpensive transportation” (Alter).
The debate of whether or not gas prices affect the demand of gas and the willingness to drive is an ever going debate that will forever keep changing with the ideas and results of different studies. But, what do you think? When gas prices are higher, do you ride the bus more, carpool, go shopping less or attend less sporting events where you have to drive? In your own life, when gas prices increase, does your demand for gas also decrease?
Works Cited
"Average Annual Miles per Driver by Age Group." Average Annual Miles per Driver by Age Group. N.p., n.d. Web. 15 Oct. 2014. <https://www.fhwa.dot.gov/ohim/onh00/bar8
"Historical Price Charts." Historical Gas Price Charts. N.p., n.d. Web. 13 Oct. 2014. <http://www.gasbuddy.com/gb_retail_price
"High Gas Prices No Longer Fueling a Decline in American Driving | AAA NewsRoom." AAA NewsRoom. N.p., n.d. Web. 15 Oct. 2014. <http://newsroom.aaa.com/2014/04/high-gas-prices-no-longer-fueling-a-decline-in-american-driving/>.
"Study Shows That High Gas Prices Do Reduce Driving, Encourage Use of Alternatives." TreeHugger. N.p., n.d. Web. 15 Oct. 2014. <http://www.treehugger.com/economics/study-shows-high-gas-prices-do-reduce-driving-encourage-use-alternatives.html>.
I believe that gasoline will always be a necessity for most people. With people who have jobs, the money earned at that will probably outweigh the price of gas. Although it can cripple a person or a family, gas will always be needed. People might argue towards other modes of transport like walking, biking, and long boarding but that can still be difficult with distance between work and home and also haw busy and dangerous some roads may be.
ReplyDeleteThis is a really great and extremely relevant post, Macauley. Out of all of us that drive cars to school, I'm sure a large percentage of us have to pay for our own gas. And, some of us don't even realize the spikes in gas prices recently because we regard it as a necessity and don't really know what we can do about it. My mom has a hybrid car, so it runs on both electric and gas. My parents thought this would be a good, useful investment as the way they are documenting it, lots and lots of money is being saved, and it is overall better for the earth as well. This is possibly the reason why companies are introducing more and more eco-friendly, electric cars. However, personally, as gas prices increase, I don't really use my car less, because for me, since I drive everyday, filling gas is really inevitable.
ReplyDeleteAs gas prices rise people are becoming more and more cautions of how much they are driving and how much they are willing to spend. But now that we are in the 20th century, car companies are coming out with cars that are more and more efficient. With some cars getting over 30 miles per gallon or even running on completely on electric. People are starting to buy cars that can take them further without spending more on gas causing them to forget a little bit about the rising gas prices.
ReplyDeleteAs the price of gas is increasing a lot more people start take more planning into how they use that gasoline. However now there are hybrid and electric cars, which can reduce or even eliminate the need for gasoline. Since gas prices are increasing there is a continuing trend that demand for more gas efficient cars will increase. People who are willing to spend extra money to buy a fuel efficient car realize that they are actually saving money in the long run.
ReplyDeleteI completely agree with the fact that driving is important to everyone now a days. So that leads us to the fact that gas is an inelastic factor to our society. As teens, a lot of us have jobs and have to pay for our own gas, or set on a certain budget by our parents, which means that people will do whatever they can to save money for gas, or combine trips. Also with that, I agree that if you carpool with others, it helps out a lot on the cost of gas. There is also those people that would much rather walk or bike places, but during the cold days of winter, they will want to drive, so at some point, driving will have to play a huge role in your life. Unless you live in a big city, like Milwaukee, we don’t have a city bus system to get us around, so we have to use our own cars and pay for our own gas. Gas may be expensive, but there are times when we must pay the price of gas, and get ourselves to work, school, or extracurricular activities.
ReplyDeleteAs gas prices get higher, I think people are more smart about where they drive. I know for me when they are higher I go on less joy rides and try to find the most direct root. But I think that it would be very hard for people to give up cars because we have had them so long. They are a luxury that many people having and I think that few would want to give up. I think with gases prices rising, the auto industry would have to respond with a different car that ran on less gas, because otherwise the industry would loose a ton of money too.
ReplyDeleteI believe that gas is inelastic, but also can be elastic to some degree. I think that people definitely need to drive more than people who will just bike or try to limit how much they are driving because most people commute a good amount to work, or school or whatever it may be. I know that in my life my mom and dad try to combine their trips to just make one long trip instead of coming back home and then going back out to the store. But I do also think that a lot of the newer cars nowadays are getting pretty good gas mileage and can go farther with the one fill up, even trucks. So overall I do not believe that gas is as elastic as some people think I actually believe it is inelastic for the most part. People need gas and most of their cars don’t need as much.
ReplyDeleteI don't think the price of gas will have too much of an effect on the demand. For the most part, gas is fairly inelastic, the substitutes that are available are not as reliable as driving a car. Public transportation is not available to everyone, and not everyone is willing to carpool. Because some places are just too far to walk to, or bike to, everyone will be buying gasoline, regardless of the price.
ReplyDeleteI do believe that the price has some effect on the demand of gas, but not a large one. Gas is needed due to the amount of cars on the road, and many places are unavailable to get to by any other way of transportation. I think people will be willing to pay for gas if it is below $4 (as shown by your statistics), but if it maintains a price above that for a longer period of time, people will probably try to find an substitute good instead of driving a car.
ReplyDeleteI believe that has prices are relatively inelastic. While the price of gas continues to arise and many people would argue there are many close substitutes such as public transportation and bikes, I believe the majority of people will continue to drive cars and cough up a few extra dollars for gas. I would also argue that in many cases, close substitutes do not exist. Take Pewaukee for example. Many adults in Pewaukee don't work in Pewaukee or within biking range, nor is there any form or public transportation that can get them to and from their place of employment with the efficiency necessary. It is because of this that the demand of gas is so high and that although in some areas gas prices may be relatively elastic, I believe in most it is a relatively inelastic commidity.
ReplyDeleteThis response was very interesting as it gave me a whole new outlook on the increase of gas prices. What seems interesting to me is that one of the sources states that as gas prices rise, automobile transportation is going to decrease. Gas is an essential need to fuel a car and to run the car, in which there is really a limited amount of substitutes to solve this problem of rising gas prices. What seemed interesting to me is the amount of people that are altering their lives, through less transportation, less dining or eating out, less family road trips, and so forth due to the rising in gas prices, because there is really no way around this scenario. Of course there are buses, bikes, or motorcycles that individuals can use to cut the amount of money spent on gas; however that is a temporary solution to a permanent, continuous problem. While there are multiple ways to avoid spending extra money on gas, overall there is a slight chance that most people will follow through with that lifestyle, allowing the expenses of gas to continue to rise.
ReplyDeleteI believe that you hit a great economic topic. But, I also believe that no matter the price, people will buy gas for their vehicles. But, what I believe should have been added into this is how it effects diesel drivers. Although they get better fuel mileage, they still have to pay about 20-40 cents more for what they need. Either way, people are still going to buy gas because not everybody will be willing to take alternatives. And, not everybody has a choice whether they drive or not. Some jobs are driving. Overall, you did a great job with the topic and detail and research on it.
ReplyDeleteGas prices must be very inelastic if even when the gas prices are on the rise many people would still want to buy them even though they could very well find other means of transportation. This was very interesting to me because i would think that most people are smarter than taking the easier way out instead of just paying the crazy amount for gas. Overall i thought this was very interesting and a good topic.
ReplyDeleteAs a paying customer of gasoline to fuel my car, the cheaper the gas the better. As gas prices continue to rise, I start beginning to drive my car less because I don't want to spend that much money to fill my tank up. But even though gas prices rise, people will always be spending loads of money to fill their tank up because driving a car is a necessity to get where you need to go.
ReplyDelete