Thanks Virginia!

Many thanks to Virginia Postrel for the link. Note that she observed a reduction in driving in LA in this period of high gas prices. Yes, the demand for gasoline is inelastic, but it’s not vertical/perfectly inelastic!

Note also her post that suggests that it could be 1996 all over again in terms of the oil policy debate. I feel obligated to point out that 1995/6 was when Phase II of the oxygenate/reformulated gasoline regulations under the Clean Air Act Amendments of 1990 were implemented? Coincidence?

I’d also like to hear from John Kerry some more specifics on what he thinks constitutes “normal” gas prices, and how he would propose to keep from having “normal” gas prices as “low” become a political expectation that politicians feel they have to deliver, regardless of the economic inefficiency, environmental implications, and other effects of artificially managed gas prices.

OK, now I have to do some work!

2 thoughts on “Thanks Virginia!

  1. Kerry sponsored a bill several years ago to increase the federal tax on gasoline by $0.50 per gallon. His problem is obviously not with the pump price of gasoline, but rather with the federal/state/marketer/refiner/producer split.

    Maybe it’s time to look at the price of bottled water, which even today is substantially higher than the “record high” pump price of gasoline.

  2. Concerning the elasticity of gasoline, I always thought the short-term values bandied about were a touch on the low side.

    A tangential observation: I was in London a couple of weeks ago, and was surprised at just how few private vehicles (versus buses, taxis and trucks) were on the roads. It seems that Ken Livingstone’s new congestion charge is working well – perhaps too well, since there is a large shortfall in the revenue he expected to get from it. Clearly, somebody in the Mayor of London’s office badly miscalculated the elasticity of demand for driving in central London.

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