Sunday, June 03, 2007

Could People Possibly Love Gasoline That Much?!

by Tom Bozzo

I'm catching up with blog stuff while I wait to get the last bit of the way home. Last weekend, Stephen Karlson found Lynne Kiesling reading patterns of gasoline consumption — not very sensitive to the late price swings — and concluding that people willingly give up consumption of Other Stuff to keep burning gas!

I commented:
[I]t strikes me that fairly obvious rigidities could lead to some confounding effects for both the own-price and substitution elasticities. And given that the high prices have been hitting truck sales pretty hard (esp. if you separate out sales of vehicles that are "car-based" but classified as trucks for regulatory purposes [*]), it seems that there is some voting-with-feet against being yoked quite so firmly to the gas pumps.

The obvious experiment would be to create a bike-ped-tram-train paradise like Vienna in the U.S., and *then* to see what people do when gas prices double...

[B]eing long in 1920's suburban -- now urban -- real estate, I'm partly betting that exurbia will be to the next few decades what rust belt cities' neighborhoods were to the latter half of the last century. At least for those who can get out.
Since I'm feeling surly, I'll add that resale values of gas-guzzling SUVs have been pathetic. Reveal that!

[*] Which is to say, sales of less gas-guzzling "crossovers" are partly masking a collapse in truck-based SUV sales.

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If the price of horse feed doubles, you shoot the horse and sell it for meat.

If the price of gasoline doubles, you can't cannibalize a car for parts, so you sell it. If enough people do that, the secondary-market price of cars goes down, and we all start living on cornbread and beans.

Apparently, it really was a horse Kiesling rode in on.
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