James Hamilton, economist/blogger and author of probably the most comprehensive study on how energy prices can precipitate economic downturns, posts this chart of consumer sentiment (solid line) against how many miles can be driven per dollar spent – ie, a rough approximation of the gasoline price (dotted line):
So what does the divergence mean, given the dramatic gyrations of the oil price? Is it demand destruction setting in? As Hamilton notes, the gasoline price has recently jostled with some other pretty big factors determining how much people drive:
Credit and employment challenges have weighed far more heavily than gas prices over the last 9 months, and are presumably far more important than gas prices for determining what happens over the next few months as well.
If the oil shock caused the recession, lower oil prices should… (FT Energy Source, 24/04/09)
Was the US recession caused by the oil shock of 2007-08? (FT Energy Source, 03/04/09)