There will be a lag. People are still paying off the debts rung up during the run up in gas. If gas stays low for six months, I imagine you'll start to see a tick up in driving again, though hopefully the shock will mean some real demand destruction has happened. This will allow some folks to make mortgage payments, larger credit card payments, and the like. People are sufficiently scared (hopefully) to act more conservatively.

Current CNN.com poll:

 

Now that gas prices are lower, how much are you driving?

 

Still driving less 63%

 

Driving the same amount as always 35%

 

Driving more 2% 

 

Total responses to this question: 36106

 

They're still driving less because overall costs are still high.

Agreed^

 

What people forget is that not only did the price of oil and gasoline go up, but so did most other things (partly due to increased fuel costs).  Even as gasoline prices have dropped back ($2.45 a gallon in Columbus today), most other costs have not dropped back.

 

Another thing to consider is that those of us who did switch to alternatives for transportation.... local transit, car-pooling, bicycles, walking.... have done it for sufficient time that it's become a habit and are (therefore) reluctant to go back to reaching for the car keys.  I think that's a major reason that demand for oil & gasoline continues to fall.

And costs are high because of greed. Business owners want to make as much profit as possible. I think people will rememeber these businesses and not support them when times are good again.

 

Places i already wrote off are Busken Bakery. They want $9.50 for a dozen donuts. UNREAL. I like Larosa pizza. But for a small pizza back in 2005 it cost 4.95 now it's over $7 for a small pizza. Yet in the same time period there is the chinese food place that never went up in price.

 

 

Then there is BW3. I like their wings also. But the chicken doubled to ridicules prices. I won't be eating there again.

Those sorts of things are lagging. These guys bought this stuff on contract 3-6 months ago. It is also worth noting that some of these prices will be sticky, because they may decide that they are more profitable selling less for more. On the other hand, prices may come down if the demand drops too much. To be honest, since deflation is such a nasty beast I'd rather see prices stay the same for a couple years rather than actually start to fall, esp. if its precipitous.

Though this belongs on another thread... it goes to the point of the most recent conversation about demand for oil & gasoline continuing to decline:

 

from www.railwayage.com

 

DART, setting records, says rail ridership still rising[

 

Officials at Dallas Area Rapid Transit say system ridership continued to grow in September despite a decline in gasoline prices, and noted the agency handled 116.8 million passenger trips on all modes in fiscal year 2008, which ended in September.

 

And costs are high because of greed. Business owners want to make as much profit as possible. I think people will rememeber these businesses and not support them when times are good again.

 

It won't be long before you'll be confused for someone who's gone on a hunger strike. Let me know how this all works out for ya.

 

I don't see the big extra profits.

What's Behind (and Ahead for) the Plunging Price of Oil

By Vivienne Walt / Paris

 

It doesn't feel like it, but we got a raise this week. The plunging price of oil, which prompted OPEC to announce a 1.5 million barrel a day production cut, has put money in the pockets of recession-worried consumers. "It follows that there's going to be some spending effect," said Francisco Blach head of commodities research at Merrill Lynch in London.

 

Oil demand in the U.S. has dropped 10% in the few weeks, continuing a year long trend. According to the U.S. Department of Transportation, Americans drove 15 billion fewer miles in August, or 5.6% less than they did the year before. DOT says it's the largest ever year-to-year decline recorded in a single month. Over the past 10 months, Americans have driven 78 billion fewer miles than they did in the same 10 months the previous year — sure proof of what economists call "demand destruction."

 

Find this article at:

http://www.time.com/time/business/article/0,8599,1853775,00.html

 

[

But one thing low oil prices can't do is get the U.S. out of its credit crisis.

 

That last line isn't accurate in my opinion. If reduced fuel prices are putting more money into consumers' pockets, it will help them tackle their debts and mean a greater money supply overall. And as the article said, it can act as a form of economic stimulus.

 

Of course, more economic activity means the end of demand destruction and a return of rising fuel prices.....

^I have to partially disagree with your disagreement, KJP.  The thing about higher oil prices is that they were more psychologically damaging than anything else.  Gas at $4 vs gas at $2 is a huge leap; however, we're still only talking pennies when compared to the way other things have jumped in price over the last few years i.e. utilities, college tuitions, food essentials, and until last year housing.  There is something wrong with our country when we are okay with paying $600-$1000/year on cell phone calling plans, but freak out when paying a similar amount for gas, which is generally more essential.  And there is something VERY wrong with our country when colleges, private and now even public, are having escalating rates at, what, 5 or 6 percent.  Wash U. was $30g/year in 2000.  Now it's over $50. 

 

I would agree on theory with your point that saving on gas bills may act as a kind of stimulus; however, I believe this savings to be fairly inconsequential (at least on a macro level) as the cost of living is so high at this point that, while every dollar counts, I just don't see any real relief coming from saving 40 or 50 bucks a month:(

 

And I say this all with little economics knowledge - just opinion

Perception of reality is often more important than reality, especially when it comes to human response.

Can U.S. Go 'Green' Even When Oil Prices Drop?

by Linton Weeks

npr.org

 

NPR.org, October 28, 2008 · Like clockwork, it seems like every time oil prices skyrocket in the United States, the country takes a step toward energy independence. Then the price of oil recedes and American energy consumers revert to their profligate ways.

 

It happened in 1973 when Middle East countries imposed an oil embargo. It happened in 1979 in the aftermath of the revolution in Iran. And it has happened again in the past few years as fuel prices spiked and a flush economy combined to propel the nation toward renewable energy, alternative fuels and the reduction of corporate America's carbon footprint.

 

Full story at:

http://www.npr.org/templates/story/story.php?storyId=96185899

My hope is that we are chastened and that the memory of the last couple years will encourage people to change. Stranger things have happened.

As Gas Prices Go Down, Driving Goes Up

By CLIFFORD KRAUSS

Published: October 29, 2008

 

VINTON, La. — Doug Guidry gave up drag racing and boating last summer when gasoline prices shot up. Billy Castaneda put off trips to Houston to see his grandchildren. Randal Shul stopped playing paintball with his buddies to save gas.

 

Now, with gasoline prices dropping, all three men are hitting the road again. “Gas going down means freedom, even when everyone is worried about the economy,” Mr. Castaneda said as he filled his 1995 Oldsmobile 88 to drive 125 miles to Houston the other day.

More at:http://www.nytimes.com/2008/10/30/business/30gasoline.html?_r=2&hp&oref=slogin&oref=slogin

There's no doubt that a portion of the population, especially those where good transit isn't readily available, will be driving more because lower pump prices have allowed them to have more spendable income. 

 

But given that we've been through better than a year of rising gasoline prices (before they started to drop back), I think two things have happened:

 

One... most people (myself included) who started driving less and resorting to alternatives (rail, transit, car-pooling, bicycle and/ or walking, have gotten into the habit long enough and realized some $$$$ savings, that they'll stick with it.

 

Two... Even among those who begin driving more, there's always going to be that fear that gasoline prices can (and likely will) go back up again.  This is where you will likely see new buyers of more fuel-efficient vehicles.

 

With federal support for rail and transit now looking like it is going to significantly increase, more transportation options should be available to a broader segment of the population.  This too should serve to keep vehicle-miles-traveled (VMT's) down and demand for gasoline down as well.

^Just one of the many vast right wing conspiracies happening now!!   It will be nice to see gas in the $2-3 range for a month at least!  Then onward and upward!!!!

 

 

I wouldn't hold your breath on $2-3.

 

Sure didn't have to hold it very long!

I think you'll see first things to return are an extra trip to grandma's house and maybe driving to work when the weather is crappy rather than taking the bus.

^Just one of the many vast right wing conspiracies happening now!!   It will be nice to see gas in the $2-3 range for a month at least!  Then onward and upward!!!!

 

 

I wouldn't hold your breath on $2-3.

 

Sure didn't have to hold it very long!

 

I honestly was referring to a long duration after the Elections.  Everyone expected prices to plummet.  That's just what happens.

 

I probably got lazy the day I typed that, and didn't expound.  I'm sitting here with an arm in a cast, so you know.

Shouldn't this and the peak oil thread be merged?

no.

I think you'll see first things to return are an extra trip to grandma's house and maybe driving to work when the weather is crappy rather than taking the bus.

I have not driven into downtown in months.  I used to every time I thought I would be in a hurry after work.  As prices have dropped, I figured i should continue with RTA 100% of the time, rather than 80% of the time.  It is undoubtedly cheaper even with the fare increases and $1.82 gas.

Cheap gas got you feeling pretty good? Get ready to worry.

 

FACTBOX-What is deflation and why is it feared?

 

Thu Nov 13, 2008 1:08pm EST

 

* WHAT IS DEFLATION?

 

-- Deflation is a prolonged and widespread decline in prices that causes consumers and businesses to curb spending as they wait for prices to fall further. It is the opposite of inflation, when prices rise, and should not be confused with disinflation, which merely describes a slowdown in the rate of inflation.

 

-- Deflation occurs when an economy's annual headline inflation indicator -- typically the consumer price index -- enters negative territory.

 

More at:

http://www.reuters.com/article/marketsNews/idUSLC18923020081113?sp=true

Cheap gas got you feeling pretty good? Get ready to worry.

 

Within a thread to exclusively discuss fuel prices being high and how that's a problem, we have low fuel prices also being a problem. 

Boom and bust. And the last moments of the boom (especially when it flies off the map) makes the bust that much more painful. An oil peak at 3.00 bucks or 100 dollars a barrel and we are in a mild recession, but the body slam of the summer took out the margin of error in a lot of peoples and corporations budgets.

"Americans are becoming much more conscious about our energy use and the desire to reduce the environmental effect of burning fossil-based fuels," Peters says.

 

I don't know about this quote.  I know that I became more proactive in reducing energy consumption (and materials use), recycling, no longer driving, etc......but I don't really agree that "Americans are becoming much more conscious about...the desire to reduce the environmental effect."  I can tell you that other than reducing plastic bag use by using reusable cloth bags, I rarely run into anyone who talks about turning off lights when they leave rooms, rides the bus because cars are worse for the environment, or avoids buying plastic products to withdraw support from petroleum industries.  I just don't see it happening.

Doesn't matter. Who said it is the remarkable thing.

To me, it doesn't matter who said it, if I feel that it's an inaccurate statement.

Except her opinion matters more than yours. I don't want to sound mean, but that fact is it does.

 

And to say that there has been no change in the environmental consciousness of Americans is pretty unobservant of you.

I didn't say that there has been no change, but I said that was inaccurate.  An overstatement.  Most people are changing there habits more because it affects there ability to get by.  That's how it will be for the foreseeable future. 

 

I'd like to see how she came to that conclusion.  You can't exactly come up with hard numbers to prove that people are changing their habits for environmental reasons.  I do recognize that many people have jumped to the other side to become more green-minded.  I don't feel that it's anywhere near prominent.

 

It's easy to give a public official's words more merit than your neighbor, but they can't see everything from their office window.

She attached no measurement or scale to her observation! How can she be overstating something in that situation? We're done here.

I'd still rather be having happy hour in the dining car of a high speed train on my way down to Columbus tonight, but at least I'll be saving on gas...

 

 

http://blog.cleveland.com/business/2008/11/gasoline_prices_likely_to_fall.html

 

Gasoline prices likely to fall to $1.65 or lower

Posted by John Funk/Plain Dealer Reporter November 21, 2008 12:36PM

Categories: Breaking News, Economy, Energy, Real Time News

 

The average retail price of gasoline fell another 3 cents overnight to $1.80 per gallon in Cleveland and $1.79 in Akron, the AAA reported this morning. The average price in Ohio was also $1.79, while the national average slipped under $2 to $1.99.

 

Decreases could continue over the weekend as local dealer wholesale prices fell sharply today to an average of $1.50. Add another dime or so for wholesaler fees, tank truck charges and dealer profits, setting the stage for average street prices in the $1.60 to $1.65 range.

 

more at above link

http://columbus.bizjournals.com/columbus/stories/2008/12/01/daily1.html

 

Monday, December 1, 2008 - 9:44 AM EST

IRS pares mileage ratesBusiness First of Columbus

 

After a bump in automobile-mileage deduction rates for the second half of the year, the Internal Revenue Service is lowering some rates for 2009 to coincide with falling gasoline prices.

 

More at above link:

 

IRS business mileage deduction

• 2005 – 40.5 cents (Average gas price in early January 2005: $1.75)

• 2006 – 44.5 cents (January ’06: $2.24)

• 2007 – 48.5 cents (January ’07: $2.30)

• January to June 2008 – 50.5 cents (January ’08: $3.09)

• July 2008 – 58.5 cents ($4.05)

• 2009 – 55 cents

 

Sources: Energy Information Administration, IRS

Yay deflation...gas prices could dip under a $1 in 2009.

 

http://www.foxnews.com/story/0,2933,462284,00.html

Already, enough of the tit-for-tat. Blue Line, take a day and simmer down - and learn to agree to disagree.

Yay deflation...gas prices could dip under a $1 in 2009.

 

http://www.foxnews.com/story/0,2933,462284,00.html

 

A glimmer of hope for Fox News' main demographic, the exurbs.

Transit ridership keeps climbing as gas prices fall

Railwayage.com

 

The American Public Transportation Association (APTA) Monday said Americans continue to ride public transportation at record levels even though gas prices have declined. APTA said more than 2.8 billion trips were taken on public transportation in the third quarter of 2008, up 6.5% from the third quarter of 2007 and the largest quarterly increase in public transportation ridership in 25 years.

 

More at:

http://www.railwayage.com/breaking_news.shtml

Maybe we should change this thread to the Fuel Prices Rollercoaster: How we're feeling it.?

 

A crisis bright spot: Cost of oil, gas falls DOE slashes energy demand forecast

Crude slides to about $42 a barrel, and a 2009 forecast predicts demand will fall by 450,000 barrels a day.

 

By JOHN PORRETTO AP Energy Writer

 

December 10, 2008

 

HOUSTON — Oil prices dipped to nearly $42 a barrel Tuesday amid new reports that the anemic global economy will lead to an even sharper falloff in energy consumption through 2009.

 

And in heartening news for U.S. consumers, a new government report projected lower home heating costs this winter, and said gasoline prices continue to tumble.

 

Full story at:

 

http://pressherald.mainetoday.com/story_pf.php?id=226573&ac=PHbiz

What is the global percentage drop in demand for energy in say, the last six months? I didn't expect there to be this much of a multiplier effect.

Gasoline hit $1.35 in some stations in Fort Wayne yesterday, a 5-year low.

Supposedly the Chinese were hoarding oil in the run up to the Olympics, which means once they released that supply and didn't need to buy and then the economy goes splat and voila.

Driving, gas price both fall

Saturday,  December 13, 2008 3:09 AM

 

WASHINGTON (AP) -- Drivers clocked 9 billion fewer miles on the nation's roads in October even while gas prices were dropping, suggesting that a downturn in driving that began a year ago is attributable to more than just energy costs.

 

http://dispatch.com/live/content/business/stories/2008/12/13/drive_less_1213.ART_ART_12-13-08_C9_4VC7KJ8.html?sid=101

Has the upturn started? I haven't been out yet today to look around, but on Thursday my nearest Speedway station, which usually has among the lowest prices in my part of town, was $1.42.

 

Last night when I came by there, it was $1.79. That's the first time in a couple of weeks that it's done anything but drop, and that's quite a jump.

I noticed the same thing. The price of oil was still the same or even lower.

A BP near me went from $1.54 to $1.79 yesterday..... probably anticipating the holiday driving season....

The futures price contracts for oil and gas went up by their largest margins this week in months. I haven't been following inventory data since summer, so I don't know if the futures price jump is due to the approach of the holidays, a short-term change in supply or the recently noted increase in demand. Likely it is a case of all three.

Possibly were seeing the effects of self-regulation by the market - decreasing price results in increased demand against a limited supply, which causes prices to increase, which impedes the increase in demand. Maybe we'll see a series of diminishing swings back and forth, eventually resulting in some kind of equilibrium among supply, demand, and price.

 

Most likely political intervention will distort the process to some extent.

 

 

Here is a BIG shocker.

 

Study: Leaner nations bike, walk, use mass transit

By Duncan Mansfield, Cincinnati Enquirer, December 15, 2008

 

KNOXVILLE, Tenn. (AP) -- Jim Richards is no kid, but he loves to ride his bike. At 51, he has become a cycling commuter, pedaling 11 miles from his home in the suburbs to his job in downtown Knoxville.

 

"It really doesn't take that much longer" than driving, he insists.

 

Click headline for full story:

http://online.wsj.com/article/SB122909981745101945.html

 

EYES ON THE ROAD

DECEMBER 15, 2008

By JOSEPH B. WHITE

Red Flags as Washington Gears Up to Remake Energy Policy Obama's pick for energy secretary has argued for regulation and higher prices to rein in energy consumption -- precisely what Washington has been avoiding for 30 years.

 

President-elect Barack Obama's pick for energy secretary, Dr. Steven Chu, is a Nobel Prize-winning scientist who's on the record calling coal a "nightmare" and advocating raising U.S. gas taxes to European levels to promote conservation.

Mr. Obama himself has so far dismissed the idea of raising gas taxes, and worked hard during his campaign to reassure the utility and coal industries that he didn't plan radical steps to slash the use of coal in power generation.

 

.......

The car is still king here, like most places in the United States, but Knoxville has developed a 41-mile greenway system that keeps Richards mostly on paved trails and off city streets.

 

I would ride a bike to work if I had somewhere to ride it, other than sharing the road with a car.  Just need to get someone in charge who is open to this idea.