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Fueling Up, Fueling Down

The Economist notes:

“For years it seemed that American consumers’ demand for liquid fuel was price inelastic—whether it was to drive their cars or get their brains going in the morning. Yet $4 seems to have been the price at which demand becomes elastic, for both petrol and a frothy latte. As a result, baristas at Starbucks coffee shops around America are starting to get a taste of what it feels like to be a carworker in Detroit.”

I wonder what the actual relationship between gas prices and Starbucks’ performance is — are their sales down more in places where people drive more? Are things worse at Starbucks with drive-throughs than those without?

I find the magazine’s comparison interesting in light of the old saw that says coffee is the world’s second most-traded commodity — right behind oil. I know which form of sludge I’d rather cut back on (it’s not the one you drink).

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This entry was posted on Friday, July 11th, 2008 at 11:44 am and is filed under Cars, Gas prices. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

One Response to “Fueling Up, Fueling Down”

  1. Ron Says:
    July 11th, 2008 at 7:12 pm

    I’d say the problem with the overall economy has more to do with people no longer able to cash out the increased equity in their homes over the price of fuel. I think $4 a gallon gas is no the straw that broke the camels back.

    Even though it’s costing people $80 to fill up their vehicles today, you still see people forking over $60 a month to Comcast for broadband, which is nearly an additional fillup per month.

    Starbucks poor performance has more to do with bad locations than locations with drive thrus, even though newer locations have drive thru windows, they are also poor real estate locations. I see WalMart doing the same thing, taking over many old KMart locations that used to be Caldors. Just because WalMart is there today will not make a poor real estate decision a good one long term, everyone sees store sales increase when they open a new location, but in a year or two when those stores look dirtier than the KMart it replaced will people still drag their kids through it?

    Same thing with Home Depot. The negative equity some people have in their homes is killing their business, maybe Home Depot overextended during the go-go years and it’s starting to show on the bottom line. Home equity loans and never ending higher valuations in Real Estate distorted many businesses.
    -Ron

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How We Drive is the companion blog to Tom Vanderbilt’s New York Times bestselling book, Traffic: Why We Drive the Way We Do (and What It Says About Us), published by Alfred A. Knopf in the U.S. and Canada, Penguin in the U.K, and in languages other than English by a number of other fine publishers worldwide.

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