Randall Parker has a post noting that in May 2008, vehicle miles traveled in the U.S. fell 3.7% relative to May 2007. Not surprising, given that prices have risen by about, say 37% (giving us an estimated price elasticity of demand of -0.1, which is higher than normally seen, so yes, we have moved up into a more elastic portion of the demand curve).
His comments and links are informative. I’d like to highlight one interesting point that he makes that hasn’t been discussed much, but that I think deserves more attention and more analysis:
The big question: when will the subsidizing governments find they can not afford to subsidize any longer? When will the full weight of oil market prices reach Chinese, Indonesians, Indians, Saudis, Venezuelans, and others who pay below market prices for gasoline, diesel fuel, kerosene, and other oil products?
Consumers in these countries do not see transparent price signals for gasoline, due to government intervention to suppress retail prices. We do not face such suppression. What effect does/will that have on demand, growth, and innovation? High prices induce substitution, including innovation beyond the short run. This is a great example of how market processes enable adaptation to changing conditions. I’d bet that we’ll have more innovations in energy efficiency here than in those countries that subsidize gasoline.