The effect of higher gas prices on our decisions
How do gas prices affect our short-term decisions in driving, or our longer-term decisions in purchasing vehicles?
Adriene Hill: Global markets are off this morning, weighed down by rising gas prices. A gallon of gas here in the U.S. will set you back 18 cents more than it did just a couple weeks ago.
We wondered when those gas bills start changing what we do, so we've called up Allan Sloan. He's senior editor-at large for Fortune magazine. Good morning, Allan.
Allan Sloan: Good morning Adriene.
Hill: So put this gas price increase into a little context for me.
Sloan: OK, over the past year, gas prices have risen to the point where it's causing society roughly $55 billion a year more for gas than it did a year ago, and that's half the value of the cut in the Social Security tax.
Hill: Wow, so it's a lot of money.
Sloan: Yeah, and it's money that is not available to be spent on other things.
Hill: So do people change their behavior when gas prices pop up the way they have?
Sloan: Well it depends on who they are. If they're someone like me who doesn't drive much, well I don't really change my behavior. But if you're someone who drives a lot and you're living close to the financial margin -- as unfortunately a lot of people are -- well then you do whatever you can to use less gasoline and lower your bill.
Hill: So how do gas prices affect our short-term decisions?
Sloan: Well, if you look at gas prices -- and it so happens I'm sitting here with a table showing 20 years of gas prices...
Sloan: Amazing, isn't it? They bounce all over the place. A few years ago, they were half the price they are now. And people started buying SUVs again. Amazing how that works. Now, it's probably about the time where we're going to have all these stories -- which will prove to be wrong -- about people saying 'I'm not buying any SUV; I'm going to buy an electric car; I'm going to do this to save money,' and about the time everyone becomes convinced that's going to happen, gas prices will fall.
Hill: Yeah, and that gets to the next question, which is how to gas prices affect our longer-term decisions, like buying a car or maybe making our summer travel plans?
Sloan: Well again, it's the same situation, where all things being equal, you'll buy a car that costs less to run than costs more to run if you think gas prices are going to stay high, and probably if gas prices don't fall dramatically in the next month, you'll start seeing a trend with people going to more gas-efficient cars -- assuming they can afford them.
Hill: Fortune magazine's Allan Sloan, thanks.
Sloan: You're welcome Adriene, it was my pleasure.