The longer gas prices remain high, the more likely consumers are to make permanent changes in their driving habits – including the type of vehicles they drive, a University of Virginia expert says.
Gas prices have risen about 47% since Feb. 28, when the U.S. and Israel launched a coordinated attack on Iran. The conflict has created a bottleneck in the Strait of Hormuz, a narrow but deep passage between the Persian Gulf and the Gulf of Oman through which about 20% of the world’s oil passes.
Attacks on ships carrying oil, natural gas, fertilizer and other products that normally move through the strait have made mariners hesitant to transit the strait, disrupting worldwide commerce. U.S. gas prices have seesawed as government officials predict the strait will open only to have it remain constricted.
“Three months ago, nobody knew what the Strait of Hormuz was. The big question is, ‘How long and how permanent is the shift in energy prices?’” said James Burroughs, the Rolls-Royce Professor of Commerce at UVA’s McIntire School of Commerce.
James Burroughs is the Rolls-Royce Professor of Commerce at UVA’s McIntire School of Commerce. (Contributed photo)
“If this is a momentary blip, if it goes up for even a few months and then drops back down, I don’t see consumers doing pretty dramatic moves,” he said. “If it’s a longer-term shift – and I think it is – it will hasten a move to new technologies.”
Continued high petroleum prices, combined with inflation, could influence consumer choices, Burroughs said. He noted that rising energy costs are directly related to increases in groceries, travel, restaurant meals and most items transported by train, truck or airplane.
“What will likely happen is consumers will cut back in discretionary areas – you are already starting to see cracks in things like vacations,” he said. “They can’t do much about the cost of groceries, having to give up their week at the beach or the high cost of filling up their car. But they can be mad about all of it, blame politicians and take it out at the polls.”
American consumers weathered sudden gas price increases in 2008 during the recession, which lasted about six months. Prices spiked again post-pandemic for about a year before receding.
Throughout both periods, consumers curtailed their spending until prices dropped considerably. But if prices remain high or keep rising for a prolonged period, that could prompt consumers to change their habits, including turning to electric vehicles.
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