That's right, class, when the price of something rises, ceteris parabis, the quantity demanded of that something falls. And guess what? That's right: "SUV and Truck Sales Plunge".
Sales at General Motors, Ford and Chrysler suffered double-digit declines, but Toyota's edged up 3 percent in April, as high gas prices accelerated consumers' move away from trucks and sport-utility vehicles.
So, higher gas prices, lower sales of gas guzzlers. Not exactly a big surprise. Also not a big surprise: "Toyota Motor said its car sales rose 12 percent, largely on the strength of the subcompact Yaris, whose sales rose 46 percent, and the hybrid Prius, whose sales were up 54 percent."
In other words, the market is working. High oil prices are causing consumers to switch to more energy efficient vehicles, exactly as 9 out of 10 economists would expect (the other 1 economist is probably in the Bush Administration or on the Clinton campaign or something). The only problem here is that revenues from higher oil prices are going overseas - to OPEC, Russia, etc. -- and also to Big Oil -- Exxon Mobil made $10.9 billion in profits in the first quarter of 2009, the second-largest U.S. quarterly profit in history.
How to fix this problem? Stop sending our money to Saudi Arabia and Exxon Mobil. Instead, capture that money (yes, through taxes) and use it to slash U.S. oil consumption. If we do this right, the United States could become a world leader in green/clean tech. Plus, we'd save ourselves a huge amount of money in the long run; transform our infrastructure to a truly advanced, 21st century one; and stop sending money to Saudi Arabia and other regimes that are NOT our friends. Or, we can just keep doing the same thing we've been doing. How's that been working for ya?
P.S. Or, we could resort to pander-bear gimmicks like the beyond-idiotic Clinton-McCain proposal to "suspend the federal gas tax over the summer." Now THAT'S an energy policy. Well, anyway, maybe for people who missed Econ 101...
Or is the good being consumed "the use of an SUV", of which the cost of gasoline is part of that price?
In any case, SUVs and Priuses are substitutes, and it's good to see people shifting their consumption from one to the other. Especially since even after high gas prices decline (and they might, though I don't think it's likely), the people that bought a Prius will continue to save gas, and the reduced current demand for SUVs will mean that our national fleet will be at least a little more efficient.
What about the demand for public transit? WMATA just posted 3 "top 10" ridership days for Metrorail in April alone. While they were linked to special events (Pope visit, baseball games, cherry blossoms), I think it's in part because of a growing baseline ridership. Seems like the demand for transit is increasing, even with the 15-20% fare hike this year.
Lowell, could you do a graph that illustrates the effect of an increased gas tax when both supply and demand are inelastic, combined with a straight per-capita refund of the revenues (alternatively, a revenue neutral reduction in payroll taxes)?
MSP
So not only do we GIVE Iraq billions of dollars to rebuild, we buy their oil with more dollars.
All of this fiscal (un)conservative nation building and interventionism is going to bankrupt America.