$5 gas won't stop the American road trip
David Paul Morris—Bloomberg/Getty Imagesoming off the July 4th holiday weekend, the average national price for a gallon of regular gasoline stands at $4.80, according to AAA. But that’s unlikely to keep Americans from hitting the open road this summer.
But when the rubber meets the road, there doesn’t appear to be a dramatic behavioral shift when gas prices jump. Asfrom the Federal Reserve Bank of Dallas put it in June, fuel demand is inelastic, meaning that it doesn’t rise or fall to the same extent as prices. “U.S. consumers historically only slowly reduce fuel consumption as prices increase. This is primarily because most consumers must drive to work, school, grocery stores, and other destinations every day,” the Fed report notes.
This isn’t unlike what has happened in the past. As the chart below shows, fuel consumption has fallen during past periods of higher fuel prices—just not in a very significant way. The only time that fuel consumption really took a hit in the last 23 years was during the pandemic. That, of course, had nothing to do with gas prices, which had collapsed.this summer, experts don’t expect that Americans will cancel their vacations en masse.
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