Drivers DO react to higher gas prices.

The evidence is starting to trickle in.  Drivers do decrease miles driven in reaction to higher gas prices--just not by much.  From the USA Today today:

Record gas prices have put a dent in our driving habits. The growth in miles driven in the USA, a mostly steep climb for 25 years, has flattened in the past year as gas prices spiked, according to a USA TODAY analysis of Federal Highway Administration data.

Driving in summer 2005 through August increased less than 1% — half the usual rate. Growth that slow hasn't occurred since the 1991 recession, according to the government's latest data, which are subject to revision.

The population and workforce grow by a bit more than 1% annually, meaning more people drive to work, so annual gains of less than that indicate a decrease in miles driven per person.

These numbers are only through August, so they don't include the big September price spikes.  More..

Subway, bus and train systems saw growing ridership in the first half of 2005 as gas prices climbed, says William Millar, president of the American Public Transportation Association.

The rates of increase doubled in late summer and fall.

[...]

The Midwest had a 1.5% decrease in vehicle miles driven in August 2005 compared with 2004, the highway administration found.

I'm not sure what the % change in gas prices was between August 2004 and August 2005, but I'm pretty sure it was much greater than 1.5%.  That means the 1 year elasticity of demand is less than 1.  Gee, the short-run demand for gas is inelastic [sarc]. 

And the article ends with an interesting economic phenomenon:

Will the changes be permanent?

"It depends on what fuel prices do," Maples says. "We're hearing about the 'low' fuel price of $2 per gallon. Nobody would have said that a year ago. We're already being reconditioned to what's normal."

So the argument seems to be that consumption (quantity demanded) will be higher at $2.00 per gallon once drivers have experienced $3.00 per gallon, than if they had never experienced $3.00 per gallon.  Interesting, but it's the weekend so I'm trying not to figure out what it means.

I'm guessing we're going to see a lot more articles like this over the next couple of months showing just how much drivers react to changing gas prices.

Comments

[dave warren]

I'd like to see a comparison of elasticities among different regions to see the impact of the availability of public transit and average distance of workers from central business districts, etc.

Anyone have any suggestions on papers that look at this?