$3-plus-per-gallon gasoline doesn't hurt enough to make people change

Perhaps we're talking about moving the goal posts here, but BusinessWeek has an article out today that figures the breaking point for getting American consumers to change their car shopping and lifestyle habits is, drumroll, $4 a gallon. I'm sure no one was predicting that precise line ten years ago when average prices were around $1.20 a gallon and SUVs were flying out the door. Perhaps at that time the economists thought $2.50 would be the point of no return, but that's come and gone and here we are. I'm not saying BusinessWeek is wrong, I'm just saying this type of predicting the future might look silly in hindsight. Or maybe not. I certainly don't know. Then again, I don't know why anyone would buy a family vehicle with an EPA rating of <15mpg in the first place.

So, what do the analysts this is coming down the pike if $4-per-gallon is the new reality, whether that's driven by high crude prices or a gasoline tax increase? Well, "many experts and politicians believe the demand for smaller vehicles would drive the average fuel economy in the U.S. to 35 mpg inside of 10 years, up from 24 mpg today." So, that would solve, partially, the Senate panel's request. When gas prices went up in Europe (due to taxes), "consumers quickly moved to smaller vehicles. In response, General Motors (GM), Ford (F), Toyota (TM) and the rest have been selling smaller, more fuel efficient vehicles there than they sell in the U.S for the past decade." writes BusinessWeek's David Kiley. It wouldn't be exactly surprising if the same thing were to happen here. But who can predict?

[Source: BusinessWeek]