Saturday, June 02, 2007

Gas Price Tipping-Point Shock

More sound economic thinking on the subject of the price elasticity of gasoline.:
"The surprisingly resilient consumption of gasoline is explained by two factors. First, though prices are just shy of the modern inflation-adjusted peak set in March 1981, Americans' incomes have risen over the past quarter-century. The share of the U.S. household budget devoted to gasoline and oil spending fluctuated between 3.4 percent and 3.6 percent throughout the 1960s, rose to 5 percent in 1981 after the two oil price shocks of the 1970s, then fell back to an all-time low of 2.1 percent in 1998. Last year, it was up to 3.8 percent."
I guess I have been a little hard on the press. There are some reporters who understand basic economics. We should listen to them.

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