Saturday, April 22, 2006

USA Today Headline: Drivers Curb Gas Use Because of High Gas Prices

Market forces work. This shouldn't have been a headline.
Americans have cut back gasoline use in apparent response to increasing prices, separate surveys by the government and a petroleum trade organization showed Wednesday.

Gas use last month was 0.6% less than a year ago, the American Petroleum Institute reported, because "high fuel prices have led to decreased demand for gasoline and other refined oil products."

The U.S. Energy Information Administration (EIA) said gasoline use the past four weeks was up a slight 0.8% vs. a year ago. Typical is an increase of 1.5%, and that's the growth rate assumed in many industry, analyst and government forecasts.

Cutting back just a little more could cause gasoline prices — which average $2.801 nationwide, up 57.7 cents from last year, according to motorist organization AAA — to drop dramatically, one veteran analyst says.

"If everyone decided to drive 3% less the next 30 days, prices would crash," says Tom Kloza, senior analyst at the Oil Price Information Service.

He doubts that Americans could manage that — "We know how well appeals to personal sacrifice work" — but still foresees less-than-normal growth in gasoline consumption this year.

That's one of the reasons we should want a free market. Prices will help allocate the distribution of resources without shortages.

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