Someone Should Study this Phenomenon

Of late, Democratic lawmakers have argued that gasoline prices are set at the caprice of oil companies, and mainly serve to provide them with undeserved profits.  However, we here at Coyote Blog try to bring you breaking news at the frontiers of scientific inquiry, and, via the USA Today, we get this fascinating revelation:

The average American motorist is driving
substantially fewer miles for the first time in 26 years because of
high gas prices and demographic shifts, according to a USA TODAY
analysis of federal highway data.

The growth in miles driven has leveled off
dramatically in the past 18 months after 25 years of steady climbs
despite the addition of more than 1 million drivers to the nation's
streets and highways since 2005. Miles driven in February declined 1.9%
from February 2006 before rebounding slightly for a 0.3% year-over-year
gain in March, data from the Federal Highway Administration show.
That's in sharp contrast to the average annual growth rate of 2.7%
recorded from 1980 through 2005....

The nation has not seen such stagnant growth in
driving since 1981, when the USA staggered through an oil shortage and
a recession. Gas prices reached an all-time high of $3.223 in March
1981 when adjusted for inflation in today's dollars.

Wow!  This seems to imply that prices have a here-to-for unsuspected utility.  They might actually be useful for matching supply and demand of scarce resources.  Fascinating.  Maybe Congress can commission a study of this phenomenon.

Postscript: Leaving the snark aside, it is hilarious in this article to see an urban planning group trying to bend over backwards to say that really, price was only a minor factor -- this really had to do with demographics and the success of our urban planning and public transportation.  Of course, it's just a coincidence that this step change occurred at the same time as a gas price spike, and that the last time it happened was the last time that gas price spiked.  Note that none of the data in the article actually supports the point of view that this was anything but a direct response to price signals.


  1. true liberal:

    The politicians also vastly overestimate the ability of private oil companies to set prices. Oil reserves are mostly controlled by inefficient state-owned giants in developing countries that suffer from low investment, and therefore low output.

  2. Mesa EconoGuy:

    And, to see just how asinine and counterproductive government interference in the oil and gas market is, see here:

    And here:

  3. Noumenon:

    George Will's article points out the problem with Coyote's post. Gas prices went up just as high in 2005 and 2006 and usage did not fall; it increased. Some articles said this proved demand for gasoline was inelastic. I figured it just proved Americans' budgets weren't stretched as tight as the media would have us believe.

    Anyway, neither demographics nor simple supply and demand from Econ 101 is going to be able to explain both this decline and the former lack of decline. Maybe there's a recession coming and that's causing the different response.

  4. M. Simon:

    You might find this of some amusement:

    Oil Companies Run By Crooks