Tuesday, May 09, 2006

Where's the double nickels? 

Despite all the whining as we have seen previously the price of oil and gasoline is still not all that high by historical standards. Even in inflation adjusted dollars it is below its all time high and when compared to purchasing power it is significantly lower than in years gone by. What’s more, a good many people in the U.S. pay more for a gallon of bottled water than they do for a gallon of gasoline. Which makes me sometimes wonder if the leadership in Venezuela might do to bottle water and sell it. Forget the Faja del Orinoco - the real money is in bottling and selling the Orinoco itself.

Be that as it may there has always been another way to discern that gasoline prices aren't really all that high. Just watch the behavior of people as they use gasoline and see if they do to economize their use of it.

The easiest way to do this is to observe how fast people are driving. Simply driving slower saves a lot of gasoline as this chart shows:

So are people buying themselves an extra 25% in fuel efficiency by slowing down from 75 M.P.H. to 65 M.P.H. (which is, incidentally, generally the speed limit)? All I can do is give my own observations. Five years ago when gasoline was cheap I would set the cruise control on my car at 65 M.P.H.. During long 5 and 6 hour highway trips other cars would be whizzing by at least 10 or 20 M.P.H. faster. Often times I would not pass another car along the entire route.

And now that gasoline is over $3 per gallon? Most other cars still blow by me 10 or 20 M.P.H. and I still don't pass anyone else. Another words, given a chance to easily knock 75 cents off the price off a gallon of gasoline virtually no one takes the offer. I guess they all still think gasoline is inexpensive, or at least cheaper than their time.

My anecdotal observations have been corroborated by the few brave (foolhardy?) politicians who proposed rolling back the speed limit to 55 M.P.H. No sooner than the proposer of that idea makes it public than he/she is inundated with hate mail and it is tabled. So for those of you living in the good old U.S.A. here is how you will be able to know when gas really is starting to get expensive - when these things start sprouting up along highways:


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