The Peak Oil Crisis: Peak Oil Elasticity

Earlier this week the U.S. Department of Energy announced that the average national price for regular gasoline in the U.S. was now $3.96 a


gallon. Don’t feel too bad though; last week the Kremlin banned gasoline and diesel exports from Russia to alleviate domestic shortages sending gasoline prices in Germany to a record $9.10 a gallon. Gasoline prices have been rising steadily since last October, and given that the summer driving season is still a few weeks away are likely to keep rising for at least a while longer.
One would think that with an increase in gasoline prices of over a dollar a gallon in the last year sales of gasoline would be slipping – and indeed they have, but not very much. With U.S. gasoline consumption running around 9 million b/d in last couple of years, consumption has only fallen by about 150,000 barrels a day, or 1.6 percent, compared with last year. Three years ago during a similar price spike, U.S. gasoline consumption fell by closer to 400,000 b/d. So far this year’s drop in consumption has not been enough to stem the rise in prices which in recent weeks have become more closely tied to the global supply/demand balance and the falling U.S. dollar.
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