As I ride my bike past all the cars stuck in traffic this evening, I will think, briefly, about gasoline prices. So far this year, I've filled up my Volkswagen twice, for a total of $90 or so. Ouch, I said as I paid $50 for a tank last week, that's a lot. Of course, living in a dense urban area, taking public transit, and using my own legs to get around almost all the time (plus driving a car that gets 8 L per 100 km), I think gasoline eats up about 1% of my annual spending.
According to the Chicago Tribune, it actually doesn't make up that much of anyone's budget, but people still freak out about high gas prices for obvious reasons:
For consumers, there's no escaping the high prices, which helps explain their obsession.
Not only do many drivers see gas prices every time they fill up, but tracking the price is unavoidable because gas is about the only product consumers regularly buy that requires visiting a special store. So, they're intensely focused on a single product, as opposed to noticing the price rise of tomatoes when buying a full shopping cart of goods.
They also stand in front of the pump and feel the financial pain as the price digits whiz upward.
And why are gas prices so high? Economics 101, baby. Combine low supply with high, inelastic demand and you get high prices:
So how can we get lower gas prices? Use less of it. Increasing supply won't change the price much because of gasoline's demand inelasticity, meaning how much gas we buy doesn't respond to price increases very much. (The actual rate is about -0.25; that is, for every increase in price of 1, demand goes down about 0.25.)