instead of joining the gym as people are wont to do on Jan 2, people ought to pull their bicycles out of the garage and commute to work by bike :-).

The temperatures next week on Monday and Tuesday have highs in the 60's.  Great weather to give it a try...

A recession has been looming on the horizon ever since the mortgage crisis (another calamity thanks to our friends at Citibank).  High oil prices just increase the chances of that.  It reduces the chance that people will spend money to buy a new more fuel efficient car.  But a recession would decrease economic activity thereby reducing energy consumption which in turn would decrease greenhouse gas emissions.  Silver lining?  =)

can't be that great, but we have left this to the point where that's how we are going to "solve" peak oil....

This (solving the problem) is because we don't start fighting fires until they have already burned down our house.  Until there is a crisis, it is not a top priority for the public.  Without public focus, there is no political will.

1. Bushes buddies
2. Environmentalists
3. after the election, Democrats
4.   Islam, the good , the bad, and the ugly

1) The major oil exporters, whose oil revenues have shot through the roof
2) The big oil companies, which are raking in enormous profits, the largest in the history of humanity
3) Anyone who makes energy efficient vehicles or other capital equipment
4) Oil services companies
5) Islamic charities/madrasas
6) Vladimir Putin
7) Maybe the environment, but only if we use this moment -- however long it lasts -- and shift energy policy in a big way (goal: slash U.S. oil consumption from 21 million bbl/d to 15 million bbl/d, 10 million bbl/d...how low can you go?)

Gas prices are only indirectly related to the price of crude oil.  Instead, gas prices are based on the 'crack spread', or the margin a refiner realizes when he procures crude oil while simultaneously selling the products to consumers (http://www.nymex.com/media/crackspread.pdf).

Crude oil is the basis of gasoline.  Crude prices, though not the totality of gasoline prices, directly affect the price of gasoline and make up a little over half the price of gasoline.  If you are talking futures prices, it is still true that higher crude prices affect the price of gasoline futures though not necessarily for the equivalent settlement month.

A crack spread, in the NYMEX, is used to lock in a margin.  And refiners' margin is only a small component of gas prices.  The execution of these spreads isn't necessarily moving market prices one way of the other, though enough of them would narrow the spread.

love/hate relationship with these oil prices.  

On one hand, oil companies and related industries are making record profits.  Good for those companies, their shareholders, and the candidates they support (Republicans - who in turn support these companies).  Happy days for the GOP.

The flip side, which people aren't talking about too much, is that a massive increase in oil prices (tripling over just a few years) without incurring crippling recessions means that all the GOP whining that raising gasoline taxes will ruin the economy is proven to be total and complete crap.  In fact, despite the sharp spike in gasoline prices over the past 5 years, demand hasn't retreated at all.  So all the posturing and whining is total garbage - we can raise the gasoline tax, a lot, and the economy won't suffer at all.  Then take all that extra money and invest it where it should be (hint - NOT in Iraq or subsidies for big oil): renewable energy efforts.

High oil prices did not top their early 80s record in real dollars until recently.  It takes a while for those oil prices to go all the way down the chain and push up the price of food and consumer products.  Higher energy prices will cause discretionary income to dry up and the goose that laid the golden egg (the voracious conspicuous consumption) will become barren.  

Demand had not taken a big hit before because consumers were riding high on easy credit.  We will soon see whether the credit markets can continue to sustain that in light of the credit crunch.

So, I wouldn't draw a conclusion that higher prices in energy didn't and won't affect demand.  There are so many variables in the economy, you have to hold all others constant in order to validate that claim.  It is an economic truth though that higher prices affect demand.  People may not demand less of the higher priced product, they may just reduce spending in other areas or argument their income through borrowing.  This conceals the affect of the higher price, but doesn't imply that the affect is not there.

Agreed that GOP's position is irrational.  Price will now have done their work though; so, they don't need to use that argument.  It would be suicide at this point to raise gas taxes.  Republicans would have a field day with raising the gas tax amid historically high prices.

Yes, the economics behind all of this is very complex, so I concede that my assessment is a bit too simple to draw a firm conclusion.  Although the same could be said the Republican argument that gasoline tax increases do great harm to the economy - they're only pushing the (also) simplistic concept that a price increase will drive down demand and therefore ruin the economy.

What we're seeing is that the demand curve for gasoline is much flatter than anyone expected.  The normal reaction, demand falls as price rises, is happening in some ways (increased demand for hybrid vehicles, perhaps a greater drop off in demand for other discretionary goods), but the fact that prices have tripled in recent years without significant loss of demand is a very strong indicator that the short term demand curve is fairly flat.

That said, an increase in the gasoline tax would likely have little effect on gasoline demand.  As you note, the overall longer term effect on the economy might be greater, but short term gasoline demand would likely be unchanged.  So I'll leave it at the tax could be raised without effecting gasoline consumption patterns in a significant way.

I would argue that short term demand is very inelastic as people have things that they need to do to get to work.

In the long term, people can move closer to work, get a more efficient vehicle, or find other options.

Oh! We totally agree on the Republican point.  Though I might take it a step further and say that we are giving them to much credit with this argument.  Republicans in the GA have not come up with anything close to rational or eloquent in this regard.  Their argument is: "Taxes Bad!  Arghhh!"

On your other points, the inflation adjusted price of gasoline has not yet doubled since 2001.  It is up a little over 50% in real terms which is about an 8% increase each year.  That's much less dramatic.  And can help explain why demand has not immediately responded to it.  Also, there is the point made by ericy about elasticity.  Gasoline being a necessity is not going to be as responsive to price changes in the short term.  People are most likely to cut discretionary expenditures before necessities in the short term.

To your conclusion, it really depends on the amount of the excise tax.  If we are talking three cents, it is absurd to think that would have an appreciable effect on demand.  If we are talking $1.50, then that can have an appreciable effect.  However, we may not see any change in consumption patterns in the short term.  But we can compare the U.S. to Europe and see the difference that policies have (inclusive of a great difference in gasoline excise taxes).  The U.K, Germany and France have had essentially minimal demand growth for petroleum; they consume nearly the same amount as they did in 1970.