Tom Turrentine, Kenneth Kurani, and Rusty Heffner

When gasoline prices rise, it makes the news. Reporters mob gas stations to ask drivers how they are dealing with the higher prices. Many drivers say, “What can I do? I have to drive.” Some drivers declare they will curtail their driving while others complain of price gouging and oil company conspiracies. We know that few drivers adjust their driving behavior much in response to gasoline price changes on the scale that occurred during our study, but we do see that sales of smaller vehicles have increased, and that hybrids are getting lots of attention. But how do consumers really think about and respond to gasoline prices? Do they know how much they spend on gasoline over the course of a year, or do they think only in terms of price per gallon? When they buy a car, do they think about fuel costs over time, are they just looking for high miles per gallon (MPG)?

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