Oil demand is elastic enough that back in 2008 when it was $4.50 a gallon, it caused a drop in consumption enough to bring the price back to $2.50 or so.
No argument re: the elasticity - but the causality of that drop probably had a lot more to do with the timing (ie, the economic meltdown) than entities going "oh, gas is expensive" and cutting back on usage.[1] Not saying the latter wasn't a factor - it was certainly happening - but at least at the time, the prospect of global economic slowdown was cited as one of the major factors behind the precipitous decline in oil prices.[2]
[1] = Maybe also with a side order of "coming out of summer, when gas prices are higher", dunno.
[2] = Economic activity evidently correlates with oil usage - for reasons I can't articulate beyond "people are Doing More Stuff, much of which requires petroleum products", but it's taken as given in a wide variety of economic articles I've read.
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Date: 2011-02-23 03:34 pm (UTC)No argument re: the elasticity - but the causality of that drop probably had a lot more to do with the timing (ie, the economic meltdown) than entities going "oh, gas is expensive" and cutting back on usage.[1] Not saying the latter wasn't a factor - it was certainly happening - but at least at the time, the prospect of global economic slowdown was cited as one of the major factors behind the precipitous decline in oil prices.[2]
[1] = Maybe also with a side order of "coming out of summer, when gas prices are higher", dunno.
[2] = Economic activity evidently correlates with oil usage - for reasons I can't articulate beyond "people are Doing More Stuff, much of which requires petroleum products", but it's taken as given in a wide variety of economic articles I've read.