Monday, August 21, 2006

Where Gas Prices Bite

A conversation at a gas station yesterday got me thinking again about the price of fuel, and our response to it. When the guy filling up on the other side of the pump started to speak, I expected him to offer some comment about the heat and humidity, but instead he said, "Well, at least it's under $3.00 again." I hadn't noticed. If middle class, middle-aged folks are at a level of acceptance that expresses itself as "gripe-and-drive," however, other segments of the population are hit much harder. An article in last week's New York Times illustrated the impact on teenagers, in a way that reminded me of my own early driving years during the first energy crisis. Another generation is growing up with the idea that fuel is scarce and dear; how will that change their attitudes about energy?

Last week's national average gas price of $3.00/gallon for unleaded regular works out to $0.73 in 1974 dollars, the year I bought my first car, a 1965 Mustang. That compares with the 53 cents/gallon I was apparently paying then--though the price I remember is closer to 48 cents, which still seemed astronomical, compared to the 35 cents my parents were paying only two years earlier. Current teenagers recalling prices at or below $1.50/gallon several years ago must be even more shocked than I was.

So here's a group that is much more affected than most of us, and what are they doing, at least anecdotally? They're driving less, foregoing other purchases, shifting to more economical cars, carpooling, and exhibiting every other behavior that older adults talk about, plus a few extras such as asking passengers to chip in for the price of fuel. Economists will argue about how permanent these responses are, and whether they will add up to much in reduced demand, but it strikes me that we're making a pretty big impression on a generation that grew up with the idea that gasoline and electricity were incredibly cheap and likely to remain that way--much like my own Baby Boom generation.

What will that mean? Well, when you add it to the Millennial Generation's innate concern for the environment, we've got the makings of an enormous early-adopter group for clean, efficient energy technologies in the years ahead, even if energy prices fall back from current levels. It will be some time before they have the purchasing power to put much of this into effect, but marketing types have been talking for years about the impact this generation is likely to have on trends of all kinds, given numbers that approach those of the Boomers and dwarf the tiny Generation X. This doesn't negate the patience and cost involved in turning over inefficient infrastructure and vehicle fleets, but it could prove to be as powerful a driver of long-term change as any direct influence of price or tax policy.

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