At What Point Do Gas Prices Make You Change Your Behavior?

Filed in archive Buying Stuff on April 24, 2007

I saw this Bloomberg article yesterday talking about the possibility of us seeing $4 per gallon gas in the near future:

Gasoline inventories, measured by the days of demand they will cover, are at the lowest level in two decades for this time of year because of refinery fires, power failures and maintenance work oil companies failed to complete in 2006. No new U.S. refinery has been built in three decades, increasing the strain on existing plants.

But the article goes on to explain that when gas prices went over $3 and everyone was griping about it, the demand for gas still was up over previous years.

So what's the breaking point? Is there a magic per-gallon cost or per-fillup cost that would make the average American stop and say, "What are my other options?"

I remember last year there were articles talking about $6 gas in the UK and articles that showed people pay $16 per gallon for bottled water if the cost of smaller bottles is totaled up---basically a way to say that we all get overheated about gas prices but can't seem to put them in perspective.

However, it's easy to cut back on bottled water if you decide it's too expensive, but not necessarily as easy to cut back on gas if your boss expects you at work in the morning. In major cities with easy public transportation, this isn't much of an issue. If you live a five minute walk from work (or, better yet, work at home), this isn't much of an issue. But in the sprawling, exurb America that has come to represent the last 10-20 years (or maybe in reality the past 60 years, post WWII), the price of gas can be a major factor if you have a 45-minute or hour drive each way, every day.

Would $7 per gallon gas make people move closer to jobs, utilize public transport more often, reverse the urban sprawl trend? Or is the magic number even higher? And how long will it be before we find out what that magic number is?