Fuel prices and urban shifts

How much to gasoline prices need to rise–and for how long–for people to change their behavior?

The Economist blog has an intriguing piece this week on gasoline prices and demand in the US, looking at the long versus short term price elasticity of oil (gasoline).  The author argued that in the short term, people cannot really change their demand for gasoline when the price rises. For many people in many North American cities, their SUV is the only way to get to work. They might cut back on other expenses, but driving isn’t one of them.

In the long term, however, if prices remain high, then people do change their lifestyles.  The Economist blog entry suggests that in urban areas we can expect people to move closer to work or transit or select a more fuel efficient vehicle.

If we extrapolate to what this could mean for cities and urban areas then, the longer fuel prices stay high, the more people might be willing to support a shift away from public spending to support the automobile.  More people might push politicians to spend public funds expanding transit or bike routes rather than adding freeway lanes, for example.  The US interest in high speed rail is an example of this.

I don’t expect the private automobile to disappear in North America–too much infrastructure is built for it.  But I do think we’ll see more balanced options for getting around metro areas as a result of sustained high gasoline prices. Bring it on.

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