I’m on vacation this week. But no, I’m not just saying this to get out of posting this week, or to brag. Americans really have started going back to the normal routine of vacations after a long break during the pandemic.
You might think that the high price of gasoline will slow down summer travel. Not so, according to estimates from AAA. While the total number of estimated travelers for Independence Day weekend is still slightly below Summer 2019 (by about 1 million travelers), travel by car is predicted to be just above 2019 levels (by about 0.5 million travelers), with 42 million Americans traveling by car. Air travel has been a mess lately and quite expensive (even compared to pre-pandemic levels), and is predicated to be about 0.5 million below 2019. Bus/train/cruise travel is still the big loser, well above the past two summers, but still 1 million travelers below 2019. (These are all estimates, of course, but AAA is in the business of knowing this data well.)
What gives? Basic economic theory would tell us that if the price of something increases, people should buy less of it. And traveling by car is much more expensive than in Summer 2019. We should also think about substitutes, and airline travel is certainly a substitute for car travel. But if we look at what has happened to both airfares and gasoline prices since July 2019, we can see that gasoline prices have increased much more (about 60% vs. 25% for airfares).
So, do we just throw up our hands and say: “it’s just too complicated, lots of factors at play”?Continue reading