I recently filled up my 50 Litre gas
tank for CAD$1.33 / Litre (that's US $3.83 / Gallon). I was
thinking that, for all the complaining about higher gas prices, I
don't drive less. That is to say, that the cost of gas (or, as my
pilot-wife friend would correct me: "fuel") increasing has yet to
have much of an effect on my purchasing.
Economists call this "elasticity."
The price of gas @ $1.00 / L is still elastic: you can raise it,
but I'll still buy more. Here is the basic supply/demand/cost curve
that you've probably seen:
Economists love to draw these (it seemed that in my economics
course a question wasn't complete without a graph). This particular
graph shows a shift in the supply. In this case, the shift is
"right-ward."
If however, you ignore supply & demand and instead look at
Prices & Quantity; look at P2 as the "old price" of gasoline,
and then look at P1 as the new, higher price. Notice what happens
to Q (quantity) - it's less. This is basic economics.
But my point is that the Q, in our real-live scenario, hasn't
yet decreased dramatically. For me it hasn't and, aside of some
people I hear of buying smaller cars (yet I see many not-small cars
still being driven), for most I don't think it has.
So, what's the solution if we want to emit fewer pollutants (and
we know pollutants are tied to Q of gas burned which is pretty
closely related to Q of gas purchased)? We increase Price (P) to
reduce Quantity. Simple.
So I am began musing what sort of price change would inspire me
to drive less. If going from $1.00 to $1.33 / L doesn't change the
amount I drive, how much would the price have to increase.
What about 5x or 10x?
I think 5x would work for me. At $6/L - that'd be $300 to fill
my tank - I'd re-evaluate many of my drives. I don't think I'd be
the only one. Business mileage costs would go up and the business
encouragement would be to carpool, take public transit, etc..
It's Simple Supply / Demand. We've move a slight ways on the
curve and it makes a slight difference (link to more small &
hybrid cars bought stat). We need to make a bigger shift to make
bigger impact.
And to make the make impact that, Gas is just too cheap right
now.
Update: many people disagree:
http://www.fastcompany.com/big-idea/unless-gas-hits-10-gallon-americans-will-continue-buy-suvs-droves?partner=rss