Jeffrey Ball notes that As Gasoline Prices Soar, Americans Resist Major Cuts in Consumption. In fact, in the short term, the “price elasticity” of U.S. gasoline use is as low as 0.1, meaning that gas prices have to rise 10 percent to induce a one-percent drop in demand:
What influences gasoline use more quickly than gasoline prices, experts say, is a change in personal income. Among the first things Americans do as their paychecks get bigger is to buy zippier cars and drive their existing cars more. Incomes have been rising in the U.S., as they have throughout most of the industrialized world. The result: “It takes a very big price increase to have a big impact today,” says Philip Verleger, a Colorado-based oil economist.Mr. Verleger estimates that real, or inflation-adjusted, gasoline prices have to rise at roughly five times the rate of real income just to keep the nation’s gasoline demand flat. Given that real income is rising at about 3% a year, real gasoline prices would have to surge 15% to prevent consumption from growing, according to his analysis.