Fuel efficiency vs. gas prices
According to a new University of Michigan study released last week, Americans buy more fuel efficient vehicles when prices are headed upward, only to return to less fuel efficient vehicles when gas prices head back down.

The University of Michigan (U-Mich) study gathered data from 99.8% of vehicles sold since October 2007 and found that gasoline prices had a major bearing on average fuel efficiency of vehicles sold. This further solidifies claims that while higher gasoline prices hurt our pocketbooks, they do push us to become more fuel efficient, and that lower gasoline prices do help our bottom line, it does not promote society to become less dependent on gasoline.

This study, combined with GasBuddy gasoline price data goes to show that Americans find little incentive with lower gasoline prices to become more fuel efficient on their own, and so perhaps one can draw the conclusion that when it comes to reducing our dependency on fossil fuels, that Americans won't do it on their own without government intervention. Perhaps CAFE standards, while costing us more up front, will help to reduce demand of gasoline to the point that relatively high gasoline prices won't slow the economy down.

You can see in the chart attached that back in 2008, when prices skyrocketed, American did indeed buy more fuel efficient cars as a result, and as prices fell, they went back to less fuel efficient vehicles, while few Americans bought more fuel efficient cars.

If gasoline was under $3/gallon, would you have any incentive or desire to buy a more fuel efficient car? I suppose the good news is that Americans are finally starting to understand (or the government is making them understand) that gasoline prices will only rise over time. You can see that even with ups and downs in gasoline prices, the average vehicles sold during the 2011-2012 window are more fuel efficient than they were in 2007 and 2008 even as gasoline prices fell then. Is government intervention working? It's hard to tell if that's the reason, or if Americans are actually desiring something more fuel efficient.