High Gasoline Prices Start to Bite into Driving, SUV Ownership

With U.S. gasoline prices at an all-time high, having climbed in fits and starts for five years, the logical results appear to be finally showing up in lower gasoline consumption and a distaste for large cars and light trucks. According to a report in the May 5 issue of Business Week, the number of vehicles on the roads dropped 1.4 percent last year, and gasoline consumption is expected to dip 0.7 percent this year. Sales of SUVs and pickup trucks plummeted 27 percent in the first quarter of 2008, with total auto sales down 8 percent.

Will oil and gasoline prices continue to trend upward and stay there, or is the current situation just a blip? That is the question. If high prices are here to stay, then of course those who immediately replace their big cars with smaller ones will come out ahead of the game, and those automakers who anticipate that behavior will be the winners. Ford Motor, which reported a surprisingly large first-quarter profit last week, is among those betting that high prices are here to stay, says Business Week.

Ironically, if gasoline prices stay in the stratosphere, the United States may be off the hook when it comes to the atmosphere. Back-of-the-envelope calculations suggest that if one wanted to halve carbon emissions from the U.S. automotive sectorâ''enough to get the country into step with international efforts to reduce greenhouse gasesâ''gasoline prices would have to double from their average levels of the past few years, which have been around $2.50. That calculus underlay a blue-ribbon report sponsored by Princetonâ''s Woodrow Wilson School last year, which recommended increasing gasoline prices by $2.50 per gallon over a period of 10 years--in effect doubling the gasoline price as a matter of policy.

Of course that's a far cry from any policy being discussed out on the campaign trails. McCain, joined by Clinton, has proposed suspending the Federal gasoline tax of 18.4 cents for the summer months, to help out drivers and give the economy a little boost. Obama has dismissed the idea as ineffectual.

If however market forces were allowed to drive the gasoline price to $5, and American consumers started to believe it was really going to stay that high, thenâ''arguably!â''policy wouldnâ''t be necessary. Over time, if econometric studies are to be believed, American drivers would spontaneously use half as much gasoline and emit half as much carbon.


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