Something Unsettling as Gas Prices Reach Historic Highs
Earlier this year a new movie version of the famous Ayn Rand novel Atlas Shrugged was released that depicted the US economy in a disastrous state by 2016 with gas prices at $34 per gallon. This no doubt unsettled the car owners in the audience who were already being pummeled by soaring gas prices for the second time in 3 years, and as unlikely as the above nightmarish scenario is, there’s no question that the persistence of +$3 gas prices is taking a serious toll on the constitution of consumers.
This became more evident last week with the release of a research report from the New America Foundation titled The Price-Induced Energy Trap. The report argues that consumers are in an “energy trap” because their ability to effectively respond to rising gas prices is limited and highly dependent on income levels, with the middle and lower income groups suffering the most. As a result, many of the desired outcomes of a policy-by-price approach (such as increased purchases of hybrids and other fuel efficient vehicles) are never realized because the neediest people cannot afford them, creating a paradox that defies traditional supply and demand elasticity curves.
Middle & Lower Income Groups Most Affected Source: New America
Putting mind-numbing economics lingo aside, the real story here is that as temperatures have fallen across much of the nation gas prices have not, at least not to the levels we’ve come to expect with autumn setting in. In fact, as reported by AAA and later picked up by the LA Times, gas prices are at historic highs for this time of year and 22.6% higher than the previous record.
In fact gas prices are rising much faster than incomes, so its hard not to feel a little queasy these days when glancing at the gas gauge and seeing it drop below a quarter tank. This likely explains why earlier this year AAA reported an upsurge in the number of stranded drivers due to vehicles that had run out of gas. Apparently many people were stretching out the intervals between refueling in the delusional hope gas prices would decline, a somewhat disturbing change in behavior that reflects the impact high gas prices have on people.
I’ll relate another rather disturbing episode I encountered this past spring on a trip from New York to DC. It was late at night, well after midnight, and I had stopped at a rest stop in Maryland to grab some coffee to keep me awake for the remainder of my journey (thank goodness Starbucks was open). As I left my vehicle I heard a woman’s voice call out to me, something about gas and getting home. I warily looked over and saw a woman of middle age waving me over from the front seat of what looked to be a 20-year-old Jeep Cherokee.
As I approached her she started waiving her wallet out the window. Did she want to show me her ID? Then I realized she was showing me her wallet was empty, and she explained that she needed money to buy enough gas to take her the 32 miles to her home. I handed the woman a few dollars, and then after thinking about it handed her a few more (unfortunately our Cost2drive iPhone app hadn’t launched yet or I could have given her the exact amount).
Something about the whole scene was upsetting. The woman didn’t look indigent, she could have been my mother and I doubt that she’s accustomed to begging for money. It made me recall some of the scenes from Atlas Shrugged, and as I got back in my car to head back to DC I started to feel a little nauseous.
Cost2Go Blog 