Gregory Bull/AP - A woman returns to her car after filling up at a gas station March 9.
“I think the evidence is strong that people are not very price responsive and that there are no magic thresholds where the effect changes suddenly,” said Severin Borenstein, a professor at the University of California Berkeley business school and director of the California Energy Institute.
In 2008 when prices last spiked, motorists carpooled, households drove the more efficient of their cars when a choice was possible, and many people opted for public transportation. But the impact was slight.
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Borenstein says the drop in consumption was 3 to 4 percentage points. “That’s a pretty small demand response when the price of gasoline nearly doubles,” he said. Moreover, he said, “this was happening in context of a giant recession, so there were income effects as well.”
Christopher Knittel, a professor of applied economics at the Massachusetts Institute of Technology, said that “consumers are less responsive today than in the past, especially when compared to the 1970s.” With the growth of families with two income earners and other social changes, motorists are less likely to regard their day-to-day driving as discretionary.
But, Knittel said, “if prices continue to be high, they start to change what cars they buy, and manufacturers start to change the cars they offer. So it really depends on the time frame.”
Knittel said that the increase in gasoline prices is partly a result of the recovering economy. “One of the reasons gas prices are high is that we are coming out of the recession,” he said. “So it’s sort of bittersweet. The economy is getting strong, but it’s hurting our pocketbook.”
That could circle around and undercut the recovery. Peter Morici, a professor at the University of Maryland’s business school, estimates that the spike in gas prices since September translates into a 5 percent cut in discretionary income and that Americans “will be eating fewer restaurant meals, wearing fewer new clothes, curtailing summer vacation plans, and postponing furniture purchases and home improvements.”
In the Post-ABC poll, 12 percent of people who consider gas prices a financial hardship said they had slashed spending elsewhere.
The telephone poll was conducted April 14 to 17 among a random national sample of 1,001 adults. The margin of sampling error is 3.5 percentage points.
Polling manager Peyton Craighill contributed to this report.
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