Will Rising Gas Prices Change Our Behavior?

Anecdotally, the stories are endless -- gas prices are approaching $3 in most of the country (or beyond, in California). Drivers indicate they are trip-linking, carpooling, even taking public transit on occasion, yet demand doesn't subside.
April 11, 2006, 5am PDT | Irvin Dawid
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"I struggle to adjust to the reality of higher prices," an information technology specialist for the World Bank in Washington, said. "Our lifestyle is designed around the car and cheap gasoline. There's very little we can do about it to reduce our dependency on our automobiles -- between the schools, the children's activities, the soccer practice, and the rest, nothing is within walking distance anymore."

Still, the biggest surprise so far is that high prices seem to have had little impact on driving habits. Gasoline demand, which averaged 9.1 million barrels a day last month, remains very strong; in fact, it is up by 2 percent since January 2004 when oil prices began to rise. Analysts are puzzled.

"The real question is, What will consumers do?" said John Felmy, the chief economist at the American Petroleum Institute, the industry's main trade group. "That's a key part of the equation."

Indeed, refiners have been hard pressed to catch up with rising demand. While refining capacity has increased in recent years, it has been outpaced by the growth in consumption. The domestic capacity is around 17 million barrels of oil a day, but the country consumes some 20.5 million barrels of oil products a day, nearly half of that as gasoline.

To make up the difference, the nation has grown increasingly dependent on imports of a wide range of petroleum products, chief among them gasoline. For example, gasoline imports reached one million barrels a day last year, or nearly 11 percent of the country's daily needs.

Thanks to Mark Boshnack

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Published on Saturday, April 8, 2006 in The New York Times
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