Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.

“Price elasticity” is a measure of how people react to rising prices. A high number means they cut back sharply when prices rise. A low number means they just suck it up and keep buying.

So what’s the elasticity of oil prices? This is important, because it tells us, for example, how people are likely to react to higher taxes on gasoline. Will they use less and find other ways to get around? Or is it damn the torpedoes, keep burning the stuff, and figure out other places to cut back?

Stuart Staniford draws our attention to the latest estimates from the IMF, and as he says, they’re pretty eye popping. Here’s the table:

Take a look at the bottom row. “Non-OECD” means poor countries, and the IMF figures that short-term price elasticity in poor countries is -0.007, which means that a 1% increase in price leads to only a 0.007% decrease in consumption. Put another way, even a 50% increase in price leads to only a negligible 0.35% decrease in consumption1. Long-term elasticity is higher, but even here a 50% price hike would lead to only a 1.8% decrease in consumption.

The rich world is modestly more sensitive. In the short term, a 50% price increase produces a 1.2% decrease in consumption. In the long term, it produces a 4.7% decrease.

Part of the reason for these tiny effects is that income elasticity is quite large. That is, when income goes up, oil demand also goes up. In the short term, a 1% income increase in the poor world produces a 0.7% increase in oil demand. So as long as incomes are going up in the developing world (and they are), the effect of higher incomes swamps the effect of higher oil prices.

If these numbers are right, they’re pretty stunning. Even in the rich world, it apparently takes massive price increases to significantly reduce the demand for oil, even over a 20-year horizon. In the developing world, forget it. As long as incomes are going up, demand will go up. Urk.

1Actually, elasticity isn’t necessarily linear, so a 50% increase might have a bigger effect than 50 times a 1% increase. However, it’s probably not wildly non-linear at these levels, so the response to a 50% price increase is still likely to be quite small.

WE'LL BE BLUNT.

We have a considerable $390,000 gap in our online fundraising budget that we have to close by June 30. There is no wiggle room, we've already cut everything we can, and we urgently need more readers to pitch in—especially from this specific blurb you're reading right now.

We'll also be quite transparent and level-headed with you about this.

In "News Never Pays," our fearless CEO, Monika Bauerlein, connects the dots on several concerning media trends that, taken together, expose the fallacy behind the tragic state of journalism right now: That the marketplace will take care of providing the free and independent press citizens in a democracy need, and the Next New Thing to invest millions in will fix the problem. Bottom line: Journalism that serves the people needs the support of the people. That's the Next New Thing.

And it's what MoJo and our community of readers have been doing for 47 years now.

But staying afloat is harder than ever.

In "This Is Not a Crisis. It's The New Normal," we explain, as matter-of-factly as we can, what exactly our finances look like, why this moment is particularly urgent, and how we can best communicate that without screaming OMG PLEASE HELP over and over. We also touch on our history and how our nonprofit model makes Mother Jones different than most of the news out there: Letting us go deep, focus on underreported beats, and bring unique perspectives to the day's news.

You're here for reporting like that, not fundraising, but one cannot exist without the other, and it's vitally important that we hit our intimidating $390,000 number in online donations by June 30.

And we hope you might consider pitching in before moving on to whatever it is you're about to do next. It's going to be a nail-biter, and we really need to see donations from this specific ask coming in strong if we're going to get there.

payment methods

WE'LL BE BLUNT.

We have a considerable $390,000 gap in our online fundraising budget that we have to close by June 30. There is no wiggle room, we've already cut everything we can, and we urgently need more readers to pitch in—especially from this specific blurb you're reading right now.

We'll also be quite transparent and level-headed with you about this.

In "News Never Pays," our fearless CEO, Monika Bauerlein, connects the dots on several concerning media trends that, taken together, expose the fallacy behind the tragic state of journalism right now: That the marketplace will take care of providing the free and independent press citizens in a democracy need, and the Next New Thing to invest millions in will fix the problem. Bottom line: Journalism that serves the people needs the support of the people. That's the Next New Thing.

And it's what MoJo and our community of readers have been doing for 47 years now.

But staying afloat is harder than ever.

In "This Is Not a Crisis. It's The New Normal," we explain, as matter-of-factly as we can, what exactly our finances look like, why this moment is particularly urgent, and how we can best communicate that without screaming OMG PLEASE HELP over and over. We also touch on our history and how our nonprofit model makes Mother Jones different than most of the news out there: Letting us go deep, focus on underreported beats, and bring unique perspectives to the day's news.

You're here for reporting like that, not fundraising, but one cannot exist without the other, and it's vitally important that we hit our intimidating $390,000 number in online donations by June 30.

And we hope you might consider pitching in before moving on to whatever it is you're about to do next. It's going to be a nail-biter, and we really need to see donations from this specific ask coming in strong if we're going to get there.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate