Economics 101: High prices lead to demand destruction:
"As average gas prices hit a record high of $4.108 a gallon this week, the government released new data showing that drivers have cut back their use of the fuel to levels not seen in five years.
The average price of gasoline in the U.S. has been above $4 a regular gallon for more than a month, AAA reports, putting a dent in gasoline demand.
Even through the Fourth of July weekend — a time when Americans traditionally get on the road — gasoline consumption dropped 3.3% from last year to 9.347 million barrels a day, according to weekly data released by the federal Energy Information Administration. For the first week of July, that is the least drivers have used since 2003, when consumption was 9.05 million barrels a day . . .
The weaker demand, combined with plentiful gasoline supplies, could eventually lead to lower prices at the pump. The price for gasoline for August delivery inched up 0.5% to close at $3.3808 a gallon on the New York Mercantile Exchange, while oil-futures prices closed one cent higher at $136.05 a barrel."
Hence, why it is often said that the high prices are the cure for high prices . . .
Gas Prices Spur Drivers to Cut Use to Five-Year Low
Supply Not an Issue, But Other Demand Keeps Oil Price High
WSJ, July 10, 2008; Page A3