Quote:
Originally Posted by Ronald Pagan
The evidence from Europe over the 90s and 2000s is that higher gas prices have, infact, led to less consumption.
But I would agree, right now demand is inelastic but not totally inelastic as we have seen that Americans drove less kms over this summer than last and total consumption of gas dropped (I think) in the wake of high gas prices.
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Its important to note the environmental distinctions between Canada, the US and Europe.
Europe has a vast, comprehensive and efficient transit line that makes most Canadian and American systems look like a joke. The average European country can also fit into the Province of Alberta, which aids in distance efficiency and intercity traffic. The average European country also has a more hospitable winter climate, which aids in people's ability to spend more time outside, rather than go from car to office to car to home. Therefore, it is reasonable to conclude that Europeans would have a lower threshold to lower their fuel consumption than Canadians and Americans.
Fuel demand in Canada is more akin to alcohol... people will pay anything up to a very extreme level... that I would guess would be in the $2.50-$3/L range. Canada and most of the US would be utter bedlam if people began to abandon their cars for transit in large numbers. The systems are simply too poorly designed and overburdened as it is.