The past few years proved that demand for oil responds to price signals. Driving in the US fell some five percent between 2007 and 2008, and transit use rose by

The past few years proved that demand for oil responds to price signals. Driving in the US fell some five percent between 2007 and 2008, and transit use rose by a similar amount. The main reason Europeans today consume half the oil per capita of North Americans is that Europe imposed stiff gas taxes after the 1970s oil shocks. Europeans drive almost as much as North Americans (some 17,000 km per capita per year compared to 18,000 km per capita per year) but they do it a lot more efficiently. But you're right that it takes a long time for price signals to drive a structural change in patterns of oil consumption. If the price of oil gets too high, many people are simply priced out of the market for oil - and in huge swaths of the USA, out of the market for jobs, homes, food, etc. as well. Unfortunately, the sharp recession that high oil prices trigger causes a rapid (if temporary) collapse in oil prices. The result of leaving the price of oil up to the market is volatile prices and wildly fluctuating price signals that periodically sabotage the incentives for individuals to change their energy use patterns.