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July 23, 2008

Living with high gas prices

It looks like we're going to be living with high gas prices for quite a while. Are drivers simply gritting their teeth when it costs them twice as much to fill up their tanks as it did two years ago? Or are we making changes to cope? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well, economists would say that in every person a little economist lives, so people we would expect would make changes over time. Yes, we will complain about gas prices, but we will make changes. And what we will work on is part of the cost equation. What you pay for something is based on two things: price per unit of that something, like a gallon of gas, and the number of gallons, the amount that you buy. And what people are doing right now is they're working on getting the number of gallons they buy down so that they can keep their costs under control. And so we see data, for example, that show that drivers now are actually driving fewer trips per month. They're driving at lower speeds. They're actually improving their fuel efficiency, and, therefore, they're cutting back on the number of gallons of gas that they buy. Now, we perhaps don't like this, but we're doing it. And the result - very interestingly - is that over the last month, the aggregate amount spent by consumers on gas has actually held steady, and that's because - we can't do anything about the price - but we are cutting back on the quantity."

Posted by Dave at July 23, 2008 08:00 AM