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How High do Gas Prices Have to Go?

The other day I was driving past a gas station and I saw someone filling up their Humvee. Given the most recent runup in gas prices, I couldn't help but shake my head and chuckle. I have to admit that, while I don't enjoy paying more for gas than I used to, I still get a sort of sick pleasure out of price hikes whenever I see someone filling the tank on their monstrous gas hog. Anyway, all of this got me to wondering...

How high will gas prices have to go before people start making real, meaningful changes in their behavior? What would it take for you to go out and buy a more fuel efficient car? Perhaps a (gasp!) hybrid? Or maybe even a plug-in hybrid? To move closer to work? Or maybe to carpool, take public transportation, or start riding your bike? How high would prices have to go before you'd cancel your next big driving vacation? While we may have already reached that point for some, I'm sure that it's still quite a way off for others.

From my own perspective, I would love to live closer to work. And not just for the cost savings. In fact, cost savings would run a distant second to having an extra hour per day with my family. But, given the size of my family, we're priced out of an appropriate house closer in. So I just live with my roundtrip commute of ~25 miles/day knowing that it's much, much worse for an awful lot of other people. Public transportation around here is horrible, and I'd hardly get to see my kids if I used it. Thus, taking the bus is really not an option that I'm willing to consider. Biking is out, too. When the roads that I have to traverse on the way to work are combined with the mentality of driver's around here, biking to work would be a suicide mission. While carpooling might work, my schedule (and that of my co-workers) is pretty varied, so it's hard to set something up. Not impossible, but hard.

Anyway, from a financial perspective, it's really not that bad. I use about a gallon of gas per day getting to and from work (it's a pretty even mix of city/highway miles), so the most recent runup costs us a few hundred bucks per year (including our other miscellaneous driving). So what would it take for me to make a big change? I'm not exactly sure. I guess I'd probably grumble and complain up to about five bucks per gallon, and then I'd start seriously re-considering my options. And that's really what's at the root of the problem... Gas prices could double and we'd all complain, but an awful lot of people wouldn't change a thing. They (we?) would simply pay the price and keep on using just as much gas as before. This is a big part of why, even if we see localized dips, gas prices won't be getting any cheaper over the long term.

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Comments
>>> mropine Commented on August 26, 2005

Back during the 2000 and 2004 Presidential elections, Bush kept bragging about how wonderful small business were doing and commented how small biz was the "backbone" of the US economy.

Well, today that "backbone" is about to break and break hard.

The reality is that the fuel prices affect everything: the guy who drives the 18-wheeler rig that delivers the fuel to your gas station, the groceries to your local store, etc; the pizza guy who delivers your pizza to your door; the furniture delivery truck; that flower shop that will deliver to your sweetie; UPS/FEDEX that delivers those shipments for small business; on and on....

For the past year, these businesses have been absorbing these costs in anticipation of gas prices going down - surprise they haven't! it is a matter of a couple of months before the real pain kicks in and an "inflation attack" hits the US.

Don't forget too, that Greenspan is on a rampage to keep raising interest rates. If he gets spooked by inflation binges, he'll raise rates by 1/2 to 3/4 of a point to fend it off. Cost of credit (loans, credit cards, etc) will go up dramatically.

Factor in the dangerous elixar of housing bubble home equity ATM spending and you can see how precariously perched the economy has been.



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