Experts Answered Your Questions on Consumer Choices Amid High Gas Prices

SUZANNE SHU: Yeah, and there's different ways that this can be done, and we've seen other areas of energy consumption where people are able to make small changes in how they get feedback on how energy efficient they're being.

For example, there was a product tried out in -- it was actually in the California area -- called an ambient orb, that people would keep in their house, and it would measure energy consumption in the home, so how much electricity you're using.

And at times when energy consumption really went up, the orb would glow red, and when energy consumption was lower, it was more of a calm blue color. And people got immediate feedback on how much they were using, and they were able to adapt, very quickly, their behavior.

And that's something that we find with a lot of behaviors, that people only learn if they have good feedback coming to them.

And with gas, we stop and we fill up every once in a while, and we maybe have some sense of how much we're using, but I think if consumers found a way to give themselves more immediate feedback.

So, it could be things like, some cars these days have live, almost instantaneous miles per gallon measures, that you could watch as you're driving and realize, "Hey, when I do a jack-rabbit start, my miles per gallon takes a dive," right?

If people used that feedback to keep track of how they're doing on a moment-by-moment basis that would be one way of improving.

Or, just keeping track of how often you fill up, or starting an office pool of who has the best improvement in the amount of gas they used from week-to-week, somebody gets a prize on Friday afternoon.

Little things like that, where we're keeping track of each other, and encouraging each other, almost the same as if you're on a diet, or trying to stop smoking, right? It's "Biggest Loser" brought over to the gas world.

JEFFREY BROWN: Steve Reich, what do you think about this, the importance of feedback?

STEVE REICH: I think that Suzanne makes an excellent point, in some of the transportation studies that I've reviewed, we see that.

There was a recent experiment in Oregon where what they were looking at was a substitute for the gas tax, but they had a on-dash display that was indicating what their charge per mile would be, and how much gasoline they were using, and how many miles folks were driving, peak and off-peak.

And even the control group in this experiment actually drove less, and conserved more fuel, just by having this display being visible, and they were cognizant and aware of what they were doing.

JEFFREY BROWN: Let me, you know, coming back to the, just this simple -- or not-so-simple -- lowering your driving speed. Several people wrote in, remembering what happened in the seventies.

Caroline McCartney from Osborn, Missouri, "During the seventies when we had a gas shortage, the Federal government met," and she put "shortage" in quotation marks, I should note, "the Federal government mandated a 55 mile per hour speed limit. I try to drive no faster than 63 to 65 miles per hour, however, I am at times afraid of being run over, as virtually no other vehicles seem to realize the fuel savings with lower speeds. Why hasn't the government implemented a slower national speed limit, to help control consumption and cost?"

Where are we? I mean, it's interesting, I mean, you don't really hear that conversation, at all, right now, do you?

STEVE REICH: Beginning to hear it. Beginning to hear some talk of maybe a 60 miles per hour national speed limit. I, frankly, am not sure I can answer the question directly, as to why not, I think that's a dialogue that should take place. It would obviously require some aggressive enforcement in order to be effective.

Anecdotally, I've seen the big trucks slowing down. But, the -- I traveled a little bit this weekend, and I can tell you that from my personal observation, the passenger car drivers don't seem to be slowing down, at all.

JEFFREY BROWN: Suzanne Shu, do you see any change on the highway, or do you hear any of this kind of a conversation going on?

SUZANNE SHU: Well, we do see it -- as Steve points out -- with the truckers, and I think there was an announcement by one of the truckers associations that they're encouraging everyone to -- all of their truckers to cut back to 65.

And some of the large trucking companies have a way of putting a speed controller on the engines and a lot of them have cut those back from, say, 68 to about 62 miles per hour as the top speed that those big trucks can go.

So, the trucking companies of course are very conscious about fuel costs, and they are taking these steps. But, Steve's right that the passenger car drivers either aren't aware, or aren't interested in slowing down.

And, to be honest, the data on this, from the last time that we had a national speed limit, down at 55 -- there's lots of differing reports. And so, this is something that -- if it does start to come up, is going to cause a lot of debate.

JEFFREY BROWN: Differing reports about whether it was effective, or what?

SUZANNE SHU: Whether it was effective, yeah, there are some reports that claimed that it wasn't terribly effective in terms of gas efficiency, although as Steve pointed out earlier, a lot of those graphs show that there are improvements when we drop from 70 to 65, so, there's some argument that I think will happen at that level.

There's also arguments about whether the faster speed limits made the roads safer, or less safe; all kind of other debates going on.

So, if this does come up in the political arena, I don't think it's something that would be a slam dunk. There's a lot of people who would argue different sides of it.

JEFFREY BROWN: And I know neither of you is here as a political analyst, but these things do become political, I suppose, don't they?

SUZANNE SHU: That's right.

STEVE REICH: Oh, they absolutely do.

And just, quick aside, one of the issues with the 55 miles per hour speed limit, I was working for a Department of Transportation in an unnamed state, and the way it was implemented, there were some issues with the penalties -- there weren't incentives for states to do this to do this -- there were penalties.

And the way the penalties were calculated, by many, many people, including the state in which I worked, were thought to be unfair because of this bizarre, arcane formula that, essentially said you had to be in compliance within so many percentile on those highways that were posted at 55.

So, states that had lots of rural, two-lane highways that were posted at the national speed limit, where people couldn't possibly go that fast were being rewarded.

And states where only the interstates, for example, were posted at the national speed limit, were being penalized. So there -- there were some issues with the way it was implemented.

There's a question/comment from Fletcher MacNeil, Vail, Colorado, "Americans have been coddled by aggressive advertising during the latter part of the last century to buy automobiles which are the fastest, 0 to 60, in 5 seconds, a larger vehicle than your neighbor's, or the ultimate in electronic equipment, and with much more power than you really need. With these thoughts embedded in the American mind and culture, is it any wonder that many Americans still abhor making use of public transportation?"

Now, I guess the first thing I wondered is, do Americans? What -- do you see any changes in Americans attitudes towards public transportation?

Suzanne, do you want to start?

SUZANNE SHU: Sure, I mean, this is always a tricky one, and just in terms of the auto industry, I do want to mention that for a moment, since it comes up in this question.

You know, as a marketing professor, perhaps people are sometimes surprised by this, but I argue that companies are not advertising things that they're trying to force you to buy, but they're advertising things that all of the research and interest they get from customers indicates that customers are dying to buy, in some sense.

So, when we see the auto industry push certain features, like how fast it goes, or how big the SUV is, then they're really responding, in many ways, to what consumers are asking for.

And I've said for a long time with gas prices that, we'll know that behavior is changing when consumers start pushing the auto industry to the point where the industry responds with much smaller and fuel efficient vehicles.

I feel like that's finally starting to happen, we've seen lots of indicators in the press that the hot new vehicles to have these days are the small ones, or the hybrids, and you know, we seem to be moving away from the SUVs; Ford has seen their profits fall, and they've been a big producer of SUVs and trucks over the years, so the industry is responding to some consumer demand on that side.

JEFFREY BROWN: So -- but before we, but that's very interesting, so before we get to the public transportation -- so, you're not buying the premise, here, that we are kind of, our desires are forced upon us?

SUZANNE SHU: I think it goes a little bit both ways.

JEFFREY BROWN: Or, we get our desires from watching all of these commercials?

SUZANNE SHU: Yeah.

JEFFREY BROWN: Or marketing?

SUZANNE SHU: It -- it, I think it certainly, you know, it goes in both directions. So, Ford, for example, would love to keep selling you big trucks and SUVs, because this has been where their profits have come from over the years.

You know, they're not happy about the fact that those sales have fallen off so hard.

So, if they had complete control over the minds of their customers, perhaps they'd want the status quo to continue. But obviously, consumers buy the things that they really value, and the they want, and we're seeing the industry respond to that.

So, it's a bit of a dynamic where consumers look around them and see what everybody else is doing, and start buying the same thing, and if all of my neighbors have SUVs, then perhaps I'm prompted to buy one. We respond to those, sort of cultural cues.

But, it's not that the companies are really forcing them upon us, in that direct of a sense.

JEFFREY BROWN: Steve Reich, do you want to weigh in on this before we get to the public transportation issue?

STEVE REICH: I'm not sure, Jeffrey, that I could comment on which way pulls or pushes, but what Fletcher wrote certainly seems to be borne out in numbers that show, you know, from 1975 when fuel efficiency standards kicked in, zero to 60 times went from 14.1 seconds to 9.6 seconds, and cars got heavier, the horsepower nearly doubled, manual transmissions became like dinosaurs -- clearly there was a huge shift.

And as Suzanne pointed out, the trucks and SUVs made up 49 percent of the light duty vehicle fleet in this country in 2007.

Regardless of which came first, the phenomena he speaks to certainly did occur.

JEFFREY BROWN: Okay, now what about public transportation -- what are we seeing now, in terms of changes?

STEVE REICH: Well, we're seeing -- we are seeing an up tick and it began, as Suzanne pointed out with one of the other behavioral changes, is when the gasoline began to approach $3 per gallon -- I believe it was August 2006. And we started to see it.

It continued throughout 2006, but overall, through 2007, there's been a several percentage point up tick.

But if, as I mentioned during the program last week, public transportation trips only represent five percent of all of the travel in the United States, and most of that is located in the Northeast.

So, which that's an indicator that something's happening, and it's a positive indicator, in my opinion, and in relative sense, it's not a huge shift, nor frankly, is the most recent report from the USDOT on the vehicle miles traveled decline, is fractional when you compare it to the increase in cost of gasoline that has occurred over the same period.

Nevertheless, they're both positive signs, and it's the first time in the 30 years that I've been watching it, that we're beginning to see some behavioral change to increases in price.

The 1973 and 1979 behavior shifts that we saw were due to a lack of supply, when the prices were actually tripling.

We don't know enough about pricing and behavior from those two times, because it really wasn't about the cost, as I said, it really had to do with your inability to actually even get the commodity.

JEFFREY BROWN: Suzanne, do you want to comment on the public transportation?

SUZANNE SHU: Sure. So, I think one of the things that's interesting about public transportation is that cities who are making the choice to provide it are really hit with a bit of a chicken-and-egg situation that, if they start providing public transportation, or build that infrastructure, they need to know that the riders are there, and at the same time, that individuals who live in those cities aren't going to rely on the public transportation until they know that the buses and trains are going to exist.

So, you know, it seems like there are cities that have tried to put in public transportation and not seen consumers really make good use of it, and then they end up, you know, either not supporting it well, or cutting back on the routes that they provide.

And then when we have the change in gas prices, the public transportation just isn't there for people.

The other thing that has a big influence on whether people will use public transportation is whether they can get to the places that they need to get to, whether it's work or grocery stores or malls or other places that they would normally drive to, using public transportation.

And we, as a country, have built up a system -- and if you look at the layout of almost any major suburb of a large city -- where the residential areas are not walking distance to a lot of those other things that we need to get to.

JEFFREY BROWN: Right.

SUZANNE SHU: Whereas, if you go to other countries where gas has always been significantly higher than in the U.S., you see the towns and cities are laid out in a way where you can much more easily walk to the things that you need to get to from home.

JEFFREY BROWN: Well, so jumping from that, because there are some questions, and I think, I guess I'll say they go to kind of the psychology of consumer behavior that you both started to talk about, and let me read two that are sort of the opposite, but express different sensibilities here.

This Chris, let's see, Charles Van Winkle from Charlottesville, "I live in a neighborhood where use of a car is required for access to basic products and services," just like the kind of place you were talking about, Suzanne. "I drive a two-passenger car with a four-cylinder engine. My wife drives a mid-sized 6-cylinder four-door sedan. There's no public transportation we can use. What can we do to reduce our transportation expenses?"

All right, so there's somebody who wants to do something, I guess, but feels like it's too hard, or helpless, in terms of making changes.

And then in the letter, just below that, from Jeff Preston in Nashville, Tennessee, "I have three scooters and no cars. The least fuel efficient scooter I have gets 75 miles per gallon on average, the best gets over 100, and has a maximum speed of 38 miles per hour. But, living less than 10 miles from work, scooters have been my answer to rising fuel prices, and trying to do my part to lessen the U.S.'s dependence on foreign oil."

So, two very different approaches, obviously, but two kinds of -- I guess I'm asking them more as a sort of psychology -- how do you see people responding? How do you measure these things, and when do you know when they've really made changes? Based on, in this case, high prices?

Steve, you want to start there?

STEVE REICH: Well, for the -- for Charles I would say that a couple of the behaviors that Suzanne mentioned earlier in that discussion, about trip-chaining, or the consolidation of trips are one way to begin to reduce your monthly gasoline bills and your dependence on the oil.

When we look at travel behavior in the U.S., it's astounding when people learn that only 20 percent of the travel that we do relates to our commute for employment.

I'm not suggesting that the other 80 percent is totally discretionary, but only 20 percent is work-related.

So, there are trips that -- there's room there, for those who don't have access to public transport, to create some savings.

The fellow with the scooters -- I'm assuming he's a maybe a far younger man than I?

[Laughter.]

JEFFREY BROWN: You sound skeptical.

STEVE REICH: My son looked like the smartest guy in the world when, despite my objections, purchased a used one last summer, and is getting the 70 miles to the gallon.

And for people in good climates, with short commutes, that don't need to be on expressways or freeways, and they wear a helmet, and, you know, those are options. They're certainly a huge means of transport in other parts of the world, that seem to be gaining popularity every year.

And I would just, if I could, Jeffrey, just reiterate what Suzanne said, in terms of the spatial development of the United States, and the difficulty of trying to serve the current land use development pattern with public transportation.

We have disbursed residencies, and disbursed employment, actually. The old model of suburb to downtown core for employment, where a line could feed that, and you could move lots of people that way, has been changing for decades. The highest growth of, in commuter travel has been the suburb to suburb commute.

It's a very difficult thing to serve with public transportation. It sometimes becomes difficult even with the most simple means of carpooling, to find that match of the one who lives in your neighborhood, and works close to where you work, and works the hours you work.

But, it's worth a try and most urban areas have some sort of ride-sharing match programs that folks can find online, and plug in their address and see if they can come up with a hit.

Like, how much big change is possible in this country? A number of people asked about moving toward alternative fuels, is there a bigger push to do that? Is it possible to change the way we live, the kind of things you were just talking about, Steve and Suzanne, earlier, about the structure of residential and business areas.

Can you put on a big think cap, here, Suzanne, and end us? And talk about what you see possible, based on what's happening today?

SUZANNE SHU: Well, I think there's a few effects that are both short-term and long-term effects. And we see that whenever the price of gas gets close to some of these thresholds like the $3 mark, the $4 mark, people do change their behavior, but it tends to be short-run, and we adapt back to that new price, and we fall into our old habits again.

And the real behavior change we want to encourage is the long-run change in behavior. And I think perhaps we're getting to a point where we are going to see some of that, as I mentioned, with the smaller cars coming out, there seems more demand for hybrids.

I know that they're starting to report long waiting times for people who are trying to buy hybrids right now, and that's a good sign that, as people are buying new vehicles, they're shifting in that direction, looking for more fuel-efficient options.

But that's a big change -- that's not something someone can wake up in the morning and say, "Well, I'll go turn in my car today for a more fuel efficient one," or it's not like we can wake up in the morning, and move our house out of the suburbs and shift it, you know, within walking distance to our office.

So, those are going to be things that take a long time to change, I'm hopeful that they will start to happen, but it's going to take awhile. There are things that, I think, from the political front can move that along, things like encouraging better gas mileage requirements for the auto manufacturers that can speed some of that up.

But, it's going to have to take a conscious decision by the Americans as a whole, to encourage some of those long-run changes.

JEFFREY BROWN: Steve, do you have a brief last word?

STEVE REICH: I agree with everything Suzanne said, and I would say in addition to the long-term horizon, we absolutely as a country, must invest in several targeted alternative fuels, so that we're not held captive by one fuel, as these other changes begin to take affect.

JEFFREY BROWN: Okay, well, let me thank you both, that's all the time we have for this Insider Forum, and I'll thank both our guests -- Steve Reich from University of South Florida, and Suzanne Shu of UCLA.

And I want to thank all of you, our viewers and online visitors who wrote in questions. We got to some of them, for those of you we missed, I apologize, but keep writing.

Thank you all for joining us. Until next time, I'm Jeffrey Brown. Thanks a lot.