October 03, 2005


Posted by Scott at 06:44 AM

One of the things debated these past couple of months, especially by economists, is how "elastic" the energy market is. How pliable is the supply and demand curve? Certainly we all need to heat our houses and much of our electricity comes from natural gas, but what about the variable areas where some consumers can make choices?

I read this morning that Ford made its last Excursion on September 30th. Excursion trivia: it weighs 9200 pounds and has a 44 gallon gas tank! Wow! Bicycle sales are exploding as are sales of compact and hybrid cars. In our household the biggest change we've had is to try and think ahead to combine trips to avoid excessive back and forth to the same areas.

Many Americans aren't in a position to change, or at least right away. But even the changes that are occurring do a lot to shift the demand side of the short supply. The cost of a vehicle definitely slows down how quickly people can change cars, but there are many things which can still affect the "demand" side of the curve.

Gasoline is certainly the current focus, but the next major one for much of the USA will be home heating. In the midst of summer it can be hard to notice what's happened to home heating fuels. According to a recent Wall Street Journal article, “natural-gas prices have more than doubled since last year and heating oil isn't far behind.” Considering what people spend heating their homes compared to filling their tanks, I think the bigger wallet impact will be in what is spent in heating fuels (oil, natural gas, and propane) than what is spent "at the pump".