Businessweek reports that Americans appear to be burning less gasoline as a result of driving less. To wit:
Traffic levels are trending downward nationwide. Preliminary figures from the Federal Highway Administration show it falling 1.4% last year. Now, with nationwide gasoline prices having recently passed the inflation-adjusted record of $3.40 a gallon set back in 1981, the U.S. Energy Information Administration (EIA) is predicting gas consumption will actually fall 0.3% this year. That would be the first annual decline since 1991. Others believe the falloff in consumption is actually steeper than the government's numbers show. "Our canaries out there tell us they are seeing demand drop much more considerably than the fraction the EIA is talking about," says Tom Kloza, chief oil analyst at Oil Price Information Service, a market research firm in Gaithersburg, Md.
Back in 2005, Goldman Sachs issued a report that suggested that demand for gasoline was not so much tied to price per gallon as percentage of income. As Reuters reported:
During 1980-1981, gasoline spending in the United States corresponded to an average 4.5 percent of GDP, 7.2 percent of consumer expenditures, and 6.2 percent of personal disposable income.
The report added that at around $100 per barrel for oil, gasoline spending in the U.S. reaches 3.6 percent of forecasted GDP, 5.3 percent of consumer expenditures, and 5.0 percent of personal disposable income. Still not as high at the bad old days of the 1970s and early 1980s.
The Goldman Sachs report also suggested that the price of oil might have to reach $135 per barrel before consumer expenditures on gasoline as a percent of income would reach levels comparable to the 1970s. Yesterday, the price was north of $118 per barrel.
According to Reuters Goldman Sachs' researchers concluded:
"Perhaps the ultimate answer to high how oil prices need to go before demand destruction occurs is derived from knowing when American consumers will stop buying gas guzzling sport utility vehicles and instead seek fuel efficient alternatives.
"Based on our analysis of gasoline spending and the economy noted above, we estimate that U.S. gasoline prices may need to exceed $4 per gallon."
The Businessweek article notes:
Just look at the latest auto sales figures. Sales fell 8% overall during the first quarter of 2008, and those of gas-guzzling large SUVs and pickup trucks dropped off a cliff, down 27% and 14%, respectively.
Whole informative Businessweek article is here.