To follow up on last week's discussion of oil prices, it's helpful to note the extent to which American consumption of oil has been declining. It's not clear whether this is in direct response to the recent runup in gas prices, but last week, the Energy Department said that demand for gasoline over the four weeks ended Feb. 24 was 6.7 percent lower than it had been a year earlier.
Those trends have been in evidence for a long, long time. In December 1981, energy expenses accounted for 7.8 percent of all the disposable income in the United States, but in December 2011, that figure was down to 5.5 percent. Interestingly enough, the inflation-adjusted price of a gallon of gas was approximately the same at both times, at around $3.30.
The basic laws of supply and demand would indicate that lowered use of oil should help bring its price down. That may be the primary thing that will dampen the prices we've been paying at the pump recently.
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