Wednesday, June 25, 2008

Are High Oil Prices Changing Behavior?

This period of sustained, high oil prices could change consumer behavior significantly. Commuting costs are skyrocketing for everybody and the further you live from work the more it is going to cost. The further you live from a major urban area chances are your house is worth less too. Calculated Risk has a short and sweet analysis with great links on the economics of all this.

The question now is whether this will last long enough to get from the talking stage to the action stage. Will people actually do something or just complain? If oil prices fall will we learn our lesson and not revert back to the way we were?

The true test comes if prices decline. If speculation and the risk premium are taken out combined with a demand reduction and increase in the U.S. dollar the price could drop to as low as $70. That is a perfect storm scenario but it could happen. As soon as it does will SUV sales spike and hybrids become cheap. Unless it lasts long enough to create an economic shift away from an oil based economy I'm not overly optimistic. Time will tell.

3 comments:

BBC said...

I'm rooting for ten bucks a gallon for gas. And people shouldn't live so far from work and commute so much, but build safe communities where they work.

I limit my driving as much as I can but I do like my mid size truck for camping and getting away from the madness.

Noah S-L said...

I heard an NPR podcast about this 100% electric car called the Zap Xebra. If the Xebra seizes the market now, while we're still on $4.00 a gallon, cars would get really electric really fast.

FeButterfly said...

Unfortunately, ZAP is not really that close to marketing an electric car according to a Wired article.