Gas price sensitivity

By Fester:

My wife noted that we are not particularly sensisitive to gas prices.  We live in a high density, reasonably walkable neighborhood with bars, restaurants, shops and grocery stores within walking distance, we own a single small car, and our combined daily car commute averages less than 8 miles.  Unless we are visiting the in-laws in New Jersey, we don't go through a (small) tank of gas per week.  We made significant lifestyle during a 'cheap' gas environment which have significant positive spillover effects now in an expensive gas environment.  Another dime a gallon does not effect us much. 

So when I read in the Post-Gazette about the lengths people go for cheaper gasoline, I remember that I am lucky:

Just yesterday, people waited for hours to get $40 in free gas at a Giant Eagle Express station in Harmarville in a deal talked up by radio station WDSY and paid for by the company that produces the Verizon Yellow Pages....

Yesterday, 24 giveaways were held from Los Angeles to Pittsburgh and Philadelphia, with each limited to the first 200 cars. In Pittsburgh, there was an effort to keep the location secret until just before the 11 a.m. start, although about 50 cars had already lined up by 9:30 a.m. yesterday, according to a Giant Eagle spokesman.

In other markets announcements were made earlier. In one city, a woman got in line the night before and slept in her car.

The standard technique for figuing out the value of time for a population is to look at the average hourly wage for the population and use that as a reasonbly proxy measurement.  An hour and a half wait would give a time value of $26.67/hr which is signigicantly above Allegheny County's wage rate, although that is the measure for the car that arrived at 9:30. Waiting is rational at that point. The time value decreases as people wait longer.

The other extreme is micro queuing when a gas station across the street is offering gas at a price that is several cents per gallon less than the more convienent gas station.  Filling a fifteen gallon tank at a dime's difference is worth $1.50.  That may be worth to most people a five minute wait, but there are instances of ten to twenty minute long lines forming for that small savings.  Some of this may be economic irrationality, but more of this behavior may be attributed to the stretched budgets of price sensitive consumers who have very low values of their own time and very high comparative values of their cash flow.