November 27, 2007
Tuesday AM

Now that gasoline has topped $3 a gallon, are Americans cutting back by driving less?

Not much, it seems. And the reasons why are rather simple, experts say.

"Gasoline is a commodity with inelastic demand," said Daniel Howard, chair of the marketing at Southern Methodist University's Cox School of Business in Dallas. Demand for gasoline does not rise and fall in step with prices, which can change daily, because it is rooted in routines that don't change, like the need to go to work.

"One of the last things that is going to be cut back on with rising prices is driving," he said.

Fariborz Ghadar, director of the Center for Global Business Studies at Penn State University, agrees.

"I don't believe that in the short run we're not going to not drive where we want to go," he said. "We'll complain about it, but we're certainly not going to not drive. Are we going to stop shopping? No. Are we going to stop going to work? That's silly."

But why don't more people respond to higher gas prices by carpooling, or by using public transit?

It's psychological, Howard said.

People who carpool, he said, are typically "people who are very social, who don't mind talking and going with friends, and who are also very, very conscious about pinching pennies."

But most commuters "want time to clear their heads and to think their own thoughts."

For many people, public transportation is too inconvenient, he said. And psychologically, using public transit can be even more unappealing than carpooling.

"You have to understand that a person's car is almost like a mini-house," he said. "It's their possession, it's their freedom. Once you are used to driving in a car, taking public transportation means you have to downgrade your existence."

Audrey Guskey, associate professor of marketing at Duquesne University, agreed, but said there were signs that consumers are at least making small changes in their behavior.

"More people are shopping online," she said, with online sales being predicted to increase this year more than 20 percent, "which is huge."

Also, consumers "double up" more often when they drive.

"When they go to the bank or to the supermarket, they may also go to the dry cleaners and pick up the kids after school and stop by the post office. They may do everything in one fell swoop," she said.

Shoppers in the holiday crush bore out her thesis. Damian and Kelly Charlesworth of Altoona, Pa. said consolidating trips has been their primary response to rising gas prices so far.

If they're doing something, they make one trip around town rather than separate trips for individual tasks, the couple said. The couple own a Chevy Trailblazer and a Saturn Aura, using the smaller vehicle more often for their local driving, saving the SUV for longer trips.

"Going over the mountains we feel safer in the bigger vehicle," Mr. Charlesworth said.

Beyond that, their strategy is to economize elsewhere, Mrs. Charlesworth said.

"We just have to save more for gas," she said.

By January, Ghadar of Penn State, expects crude oil to have breached the $100 per barrel mark; he also expects it to remain above that mark for a good long time, because of burgeoning demand, tightness of supply, and geopolitical factors such as the war in Iraq, sanctions on Iran, and President Hugo Chavez' drive to nationalize Venezuela's oil fields.

"I think you will very easily see $4 a gallon, and maybe even $5, if production is not brought up to speed," he said. "And we will learn to live with it. Even if gasoline prices are $5, we will still be driving maybe 98 percent of what we do now."

Likewise, Howard of SMU said, "Gasoline prices are going to have to go a whole lot higher before you begin to see people cutting back, and I'm talking about $5 to $7 a gallon."

But even those prices will not change behavior if they arrive gradually enough for people to make "slow, incremental adjustments to other parts of their life," he said. The only thing that would shock people into driving less would be "a very rapid rise to levels not seen."

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