Drivers shrug as gasoline prices soar:
Prices at the pump are rising again, much as they do every spring as oil traders bid up the price of crude ahead of possible summer shortages. Possibilities for more conflict in Iran and elsewhere in the Middle East are adding to the surge.
A demand increase is in the first sentence. A future supply decrease expectation is in the second. This leads to another demand increase today in the futures market. No real supply change has occurred. So, how will consumers react?
But there is something new this time, energy experts say, in how drivers are reacting — or, more accurately, not reacting, even as the price of gas has climbed over the last two months to a national average of more than $2.60 a gallon. It has topped $3 a gallon in many parts of the country, particularly along the Pacific Coast.
In the late 1970s, OPEC oil shocks and gas lines persuaded most Americans to sacrifice some of their pleasure trips and drives to the mall, ease up on the gas pedal, and switch to the bus or train.
But as Americans enter the sixth year of rising oil and gasoline prices, their shift in driving habits this time has been much less extensive. What’s more, in recent weeks, gas consumption has gone up, not down, and drivers are changing their daily driving habits only slightly.
Since the potential supply decrease is only recent, the majority of the price increase has been due to demand increase and is totally expected at this time of year. Therefore, we have the causality wrong in this article. Since driver behavior is behind the increase in price, the higher price will only reduce the intended increase in driving behavior, not decrease driving behavior.
The rest of the NYTimes article focuses on the increase in gas prices over the past 6 years, not the past few months. Rightly, it discusses long term decisions that are difficult to change quickly like the purchase of big cars and big commutes. But this is irrelevant to the events in the gas market in the most recent months.
If a demand increase leads to higher prices we'll see higher consumption as well.
