Location: Halstead, Kansas, United States

This is my seventh year at Halstead which is also where I live with my wife and my soon to be two year old daughter.

Tuesday, October 19, 2004

How high does the price have to be before you change?


I am still hearing a lot from my high school students about the high price of gasoline. It is also a common story on the news and even rears its head in campaign speeches. Still, I have not seen or heard of any of my students changing their driving habits because of the price of gas. Why? Probably because gas is an inelastic product that people need to perform in our society. That means the price can increase and people will still buy it. How high can the price get? Well, CNNmoney says:

If gasoline reaches $2.25 a gallon, only 10 percent said they would consider a change and only 1 percent said they would make an immediate purchase of a more fuel-efficient vehicle. It would take gasoline prices hitting a sustained $2.75 a gallon to get 19 percent of those surveyed thinking about a more fuel-efficient vehicle; another 7 percent would buy one immediately...At $3.25 a gallon, the survey found that about 35 percent thought about buying a more fuel-efficient car or light truck, and 18 percent considered making an immediate purchase of a more fuel-efficient vehicle. It would take gas at $3.75 a gallon to motivate about 40 percent to consider a new car and another 40 percent to make an immediate purchase.

I would let the price get much higher before thinking about a more fuel efficient car. I did buy an Acura this summer which uses premium gas and I thought about high prices of gas, but still other factors swayed me to buy it. I will point out that I probably would be interested in the new hybrid SUVs.

FOR DISCUSSION: How important are gas prices to you when determining which car to buy? What other factors do you consider?


Anonymous Anonymous said...

This is Aaron McDaniel, I think that the prices are WAY TO HIGH!!!! it cost me almost 40 dollars to fill up my blazer! I couldnt believe this. I am actually looking for a more gas conserving vehicle right now. i think that for the time being, good gas millage is a big plus. I also think that that what kind of driving on the car was done would affect me buying a car.

8:30 PM  
Blogger Mr. Warsnak said...

I hear this all the time about gas prices. They are too high!!! I would argue that prices are where we expect them to be. Let me put it this way:

If you were the gas refiners and sellers, what price would you sell at? Wouldn't you sell at the highest price possible? If that is the case the price of gas is always at the point where profits are maximized. Oil companies would not keep prices down to be nice. Then why are the prices rising now? Obviously there must be some other factors at play that are pushing prices up. Any ideas wha these factors might be?

8:46 PM  
Blogger John said...

Uh yea, give it 60 years and there won't be any oil left in this world. Hope hydrogen fuel cells get perfected soon.

10:47 PM  
Blogger Mr. Warsnak said...

There will still be a lot of oil on the planet in sixty years but the high price of gasoline provides the push for innovation and invention that John mentions. Would their be any innovation if the government stepped in and tried to keep gas prices low?

7:02 AM  
Blogger John said...

The source I used told me that at the current rate of consumption, oil deposits would run out in about 60-70 years. This source is wrong. I found much better information on how drilling technologies can increase the amount of oil we can obtain. However, we do still need to find alternate forms of energy. If only cold fusion worked...

4:51 PM  
Blogger Mr. Warsnak said...

John, you have hit on the improtance of rising oil prices and why they can be good. The high prices procide and incentive to spend money of alternative fuel research. As oil becomes more expensive to drill for, the price will continue to rise providing the incentive for more reserach. When the reserach pays off with fuel cheaper than oil the demand for the product will be high and the profits will be large. This is the goal of the free market society.

5:21 PM  
Blogger Doc said...

I am just going to buy a motorcycle... i mean a 3 - 5 gallon tank gets 50 or higher miles to the gallon, thats good in my eyes but the downside is that insurance for a motorcycle and my age are higher so i think it pretty much evens it out to be the same all the way around.

But already we are creating electric powered cars and such, and new methods of transportation will be created like... a hover board or something i dont know, but ya.... thats all i have to say on the subject.

8:36 AM  

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