WRITING IN FORBES, NICK SCHULZ notes something I’ve been wondering about — if high gas prices are hurting consumers as much as news accounts say, how come consumers aren’t changing their behavior?
But what’s more interesting about these stories is what they don’t tell you. For example, the Associated Press reports that “surveys indicate drivers won’t be easing off on their mileage, using even more gas than a year ago.” Now why is that? If prices are rising, one would expect consumers would use less.
The answer might be in some of the long-term trends that the short-term media lens is too cramped to see. Energy prices may be rising, but energy itself is much less important to consumers and to the overall economy than it once was.
According to the Bureau of Economic Affairs ( see chart here), American consumer spending on energy as a fraction of total personal consumption has declined considerably since 1980. Whereas 25 years ago, one in every ten consumer dollars was spent on energy, today it’s one in every 16. In other words, what it takes to heat and cool our homes and drive to and from our jobs and vacation destinations is relatively less costly than it was then.
This goes a long way toward explaining why even when gas prices rise this summer–higher than they were throughout the 1990s–people will still be driving more; it’s much more of a value than it was a generation ago.
Heck, as I’ve mentioned before, people don’t even seem to be slowing down on the Interstate. Go less than 85 in the left lane and you’ll find some soccer mom in a Honda Odyssey flashing her lights behind you.
UPDATE: Check out this gas price chart that shows adjustments for inflation. (I’ve mentioned this before.)