Suggested Citation:
Medlock III, Kenneth B. and Amy Myers Jaffe (2008) The Global Energy Market: Comprehensive Strategies to Meet Geopolitical and Financial Risks - U.S. Energy Policy and Transportation . James A Baker III Institute for Public Policy

Driving is part of the American way of life, making gasoline a basic good that most Americans consume. Because households cannot easily change the automobiles they own instantaneously, the ability of consumers to substitute away from a particular level of motor fuel consumption is limited in the immediate term. In other words, gasoline demand is highly price-inelastic in the short run. Thus, large or abrupt changes in motor fuel prices can have substantial impact on consumers’ discretionary spending.