Please disable your Ad Blocker to better interact with this website.

Jannah Theme License is not validated, Go to the theme options page to validate the license, You need a single license for each domain name.
CommentariesEnergyGovernment PoliciesNews

Commentary: No End in Sight for Our Gasoline Use

By Levi Russell

Will Donald Trump win the 2024 election?

Commentary by Levi Russell originally published by RealClearEnergy and RealClearWire

Despite Biden’s attempts to “end fossil fuel” some basic economic analysis indicates his efforts are not in line with what the public wants. If you think back to your Econ 101 class, you’ll probably remember something called revealed preference.

This basic insight of economics says that people’s actions in a market place are a much better indicator of what is going on in their heads than asking them in a poll. Someone might tell you they like Biden’s attempts to kill off reliable, inexpensive energy, but when the rubber meets the road, their purchasing decisions say otherwise.

This isn’t to say that the Biden administration hasn’t tried and, in many ways, been successful at impoverishing Americans via stupid energy policy. Shutting down refineries, killing pipeline and drilling projects, draining the SPR, and other efforts have dramatically affected the supply side of the industry.

Americans have certainly felt the pain Biden’s administration has imposed on us. Gasoline prices generally follow a seasonal pattern, so the recent drop in prices this winter has to be put into context. The average price of gasoline nationwide in the second week of January in 2022, 2023, and 2024 was $3.209 per gallon. In the same week of January from 2017 to 2020, the average was only $2.432 per gallon. That’s an increase of nearly 32% between the two time periods!

If you follow energy markets, you might be aware that gasoline consumption dropped significantly during the lockdowns of 2020, and that it hasn’t rebounded back up to the 2019 high since then. This, some say, is an indication that fossil fuels are on their way out. They say we’ve reached peak consumption and it will dramatically fall off in just a few years. While oil market experts are putting the lie to this net-zero pipe dream, there’s another simple tool of economics we can apply to better understand the situation.

Thinking back to Econ 101 again, you might remember some of the basic math you did in class. Specifically, the price elasticity of demand is a simple but powerful tool to show in one number how important a good or service is to consumers. To compute this, we can use the data sources I’ve already referred to.

Comparing 2019 to 2023, we’ve seen a 35.1% increase in gasoline prices and a 5.66% reduction in gasoline usage over that time frame. Dividing the latter by the former gives us the price elasticity of demand for gasoline: -0.42. The negative sign is an indication that this is a demand curve: higher prices mean lower consumption.

Again recalling Econ 101, you might remember classifying the ranges of this statistic. A price elasticity of demand greater in magnitude than -1 indicates “elastic demand” meaning that a given increase in price leads to a relatively large reduction in consumption. Inelastic demand is when the magnitude is less than 1; a given increase in the price leads to a small reduction in consumption.

As price elasticities go, -0.42 is very small, basically insignificant. A price elasticity of demand that low is indicative of a necessity, not something you’re planning to move away from in the next five years. Even with a lockdown that upset the entire world economy, gasoline demand is rock solid. So much so that a policy-induced 35% increase in prices has led to a mere 5% reduction in use. The question for 2024 is, will Americans continue to let the Biden administration choke off our supply of this civilization-supporting fuel?
__________

Levi Russell is an associate teaching professor at the University of Kansas School of Business.

This article was originally published by RealClearEnergy and made available via RealClearWire.

Deneen Borelli

Deneen Borelli is the author of Blacklash: How Obama and the Left are Driving Americans to the Government Plantation. Deneen is a contributor with Newsmax Broadcasting. She is a former Fox News contributor and has appeared regularly on “Hannity,” “Fox & Friends,” “Your World with Neil Cavuto,” and “America’s Newsroom.” She has also appeared on Fox Business Network programs “Making Money with Charles Payne,” “The Evening Edit with Liz MacDonald,” and “Cavuto: Coast to Coast.” Previously, Deneen appeared on MSNBC, CNN, the BBC and C-SPAN. In addition to television, Deneen co-hosted radio programs on the SiriusXM Patriot channel with her husband Tom. Recently, Deneen co-hosted the Reigniting Liberty podcast with Tom. Deneen is a frequent speaker at political events, including the FreedomWorks 9.12.2009 March on D.C. which drew a crowd estimated at over 800,000 people. Deneen is also an Ambassador with CloutHub.com, a social media platform that promotes free speech, and with the America First Policy Institute (AFPI) which advances policies that put Americans first. Deneen testified before the U.S. House of Representatives Committee on Natural Resources in May 2011 and before the Ohio House Public Utilities Committee in December 2011. Previously, Deneen was a BlazeTV.com host, Outreach Director with FreedomWorks.org overseeing its Empower.org outreach program, a Project 21 Senior Fellow, and Manager of Media Relations with the Congress of Racial Equality (CORE). Prior to joining CORE, Deneen worked at Philip Morris USA for 20 years. During her corporate career at Philip Morris she worked in various positions, her last as Project Management Coordinator in the Information Management department where she was responsible for the department’s mandated quality processes, communications, sales information and database management. Deneen began her Philip Morris career as a secretary and advanced to positions of increasing responsibilities. Deneen worked full-time and attended classes at night for 11 years to earn her B.A. in Managerial Marketing from Pace University, New York City. Deneen served on the Board of Trustees with The Opportunity Charter School in Harlem, New York. She appeared in educational videos for children, worked as a runway fashion model, and auditioned for television commercials. Her interests include ancient history, pistol target shooting, photography, and volunteering at her church. Deneen currently resides in Connecticut with her husband Tom.

Related Articles