Landspeed Prius Hits 130.794 mph at Bonneville
3Q Oil Production from 24 Major US-Based Energy Companies: Down 2% Year-to-Year

Increase in Energy Prices not Spurring Conservation

Rigzone. The surge in fuel cost this year has not catalyzed any noticeable conservation. The consensus among experts is that higher prices need to persist for a longer period for  change to occur, although some are more optimistic about rapid change than others.

Economists, energy analysts and efficiency gurus say they expected petroleum demand growth to slow in 2004, given that total spending will rise by about $295 billion, or 27 percent. Instead, worldwide oil demand grew more than 3 percent, according to government data, or about twice as fast as the market had originally anticipated. [...]

Mark D. Levine, the director of the environmental energy technologies division at Lawrence Berkeley National Laboratory in Berkeley, Calif., said he was "disappointed" though not entirely surprised by the inelasticity of oil demand over such a short period of time. [...]

Levine...believes that as oil demand in China and other developing nations grows, and as oil producers eventually have trouble keeping up with demand, decision-makers in households, corporations and, most importantly, government, will rethink the way we consume energy.

“Remember when those huge monster cars went out of fashion? Well, that will happen again,” he said.

The question is: What (or when) is the tipping point?


John Norris

Gas here in the UK is over $1.50 per liter. That's almost $6 per US gallon. There has been no noticeable "demand destruction" here. The tipping point might well be a way off yet. Do you have any data on inflation adjusted gas prices? Or as a percentage of disposable income? I suspect $2+ isn't all that outrageous, historically speaking...

-- John


You’re quite right on that. The inflation-adjusted peak was in 1981, where the average national retail gasoline price was $2.862 per gallon in 2004 dollars (absolute peak was in March 1981, at $3.019). That was even higher than the adjusted retail price of gasoline in 1919, when the market was just getting started.

In California, the adjusted 1981 peak price was $3.03.

So yes, there’s still some way to go.


I think the tipping point is NOT just a function of price, but of the public's perception of the permanency of hte price change. If people think that "high" prices are just a short-term spike (which is definitely the prevailing belief in the mainstream US populace), then they won't react--why downsize your car when gas prices will come down in a few months, anyway? Once they realize that we'll soon be beyond the age of insanely cheap oil, and that it's a permanent change, I think we'll see demand react to higher prices.

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