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Gas Prices Fall to $1!!!

Gas prices fall via vehicle substitution and innovation! It used to be the American way, but now it is the global way. Adapt and innovate to beat out the competition.

With the rise in gas prices, the automotive industry understands economics and has already been innovating ways to combat rising gas prices. With new vehicles such as the 2009 Toyota Prius that will get 100 miles/gallon, the net gas price will be the equivalent to $1 dollar gas at the pump!

So you are probably wondering how this idiot came up with $1 gas prices when gas is hovering around $4 per gallon. Well it is simple math and economics.

First, we have substitution. This is what occurs when people have budget constraints and demand a certain amount of a goods based on a budget. People will choose substitute goods if it allows them to consume more in other areas. For example, we will all be more likely to buy a car that uses less fuel because it will allow us to eat more chocolate. Okay, stupid example but you get the picture.

This leads to innovation. In order to compete, car manufacturers design cars knowing that consumer behavior will shift in order to maintain the ability to - sticking with my bad example - eat more chocolate. Led by Honda and Toyota, even GM and Ford have rushed to develop cars that get 100 mpg.

In today’s market, assuming I have a fuel efficient car, I might be getting roughly 25 miles per gallon. If I were getting 100 miles per gallon, I could drive 4 times further per gallon. If today’s gas is $4 per gallon, I would end up with a net price of $1 per gallon compared to the average.

We don’t like paying $4 at the pump and the car companies had to listen and offer a car that will lower the “real price” to $1. Unfortunately, during 2008 we all feel tighter in the wallet but by 2009 we can get back to affording more chocolate by purchasing a well deserved new car! If you prefer to buy American, whatever that means, buy a volt.

This is the age of the consumer, so let’s tell them what we want, what we need, and watch them deliver!

Cliff Pape
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