A basic principle of ours: High Prices impact consumer behaviour, contradicting the commonly held view, in both energy markets and among some consumers, that energy consumers are somehow immune to price signals, and will keep on paying because they have no choice.
From almost day one on this blog, we’ve been pointing out how demand destruction is occurring in ways and places where energy conservation was once never thought possible. A little demand destruction here and there won’t impact market fundamentals, but in aggregate little things mean a lot.
Latest heretofore impossible news on consumer shifts, comes from LA, where commuters are hitting the rails. That bears repeating: The shift in behavior extends beyond Southern California. Americans drove 1.4 billion fewer highway miles in April compared with the same month last year, and 400 million fewer miles than they did in March, U.S. Transportation Secretary Mary E. Peters announced this week. Peters also said that gas-guzzling sport utility vehicles are decreasing in popularity, as sales of mid-size sport utility vehicles were down 38% year-over-year in May.
At 19.5 US gallons of gasoline from a barrel of oil, that should mean a drop of 35,000 barrels per day at 20 mpg for April alone, or 135,000 barrels per day year on year. Who says energy prices can’t influence behaviour? That news will give oil traders kittens. Eventually.
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