Gasoline Prices Affecting America's Driving Habits - The Tipping Point

Arthur Giron

After years of wondering and conjecture, it appears that we've finally found it: the point at which gasoline prices will actually change what Americans drive. Like a person searching in the dark with his hands outstretched, we didn't know whether that point was nearby or far away. The speculation was wide-ranging - three dollars per gallon, four, five, more? No one really knew how high gas prices would have to go to alter Americans' driving habits. The first milestone, three dollars a gallon, arrived after Hurricane Katrina put several refineries out of service. It was a figure never seen before in the United States, although in inflation-adjusted terms, it wasn't as pricey as gasoline was back in the early days of motoring. But it's hard to think in inflation-adjusted terms when the station signs are starting with the number three for the first time.

Still, three-dollar-a-gallon gasoline caused barely a ripple in the marketplace; Americans merely switched from cash to credit.

In a book published only last year, Oil on the Brain - which treks backward up the gasoline supply chain, from gas pump, to distributor, to refinery, to U.S. and finally foreign oil fields - author Lisa Margonelli cites some interesting statistics. A 2004 survey by Maritz Automotive Research found that only four percent of buyers said fuel economy was their most important criterion when buying a car; the figure for cupholders was higher. Margonelli also cites a 2005 study, which postulated that if gas prices stayed at four dollars a gallon for more than a year, drivers would cut back their consumption by only five percent.

But for a lot of Americans, fuel economy has become very important indeed. Four dollars a gallon is proving to be a much bigger deal than anticipated.

According to AAA, the national average for a gallon of self-serve regular reached four dollars for the first time on June 6 of this year; California reached the milestone on May 22. Even adjusted for inflation, it's the most expensive gasoline ever on record in the United States. And never mind the predictions of economists or the wisdom of surveys - it's already having substantial repercussions in the marketplace.

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