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!