Analysts say gasoline could be dropping back to a modest (?) $3.50/gal this month. Will drivers forget the conservation they have practiced?

The numbers are in, and conservation has made a difference. In June, the demand for gas fell 3%, and 4% in July & Aug. In June drivers drove 4.7% fewer miles, according to the US Dept. of Transportation.

There will be some price where Americans won’t be sensitive. Michael McNamara, Vice President of SpendingPulse, sees it at around $3.20/gal.

We see it at the point where we start getting 6-packs of Coke with our purchase again.

Duke University researchers say thinking gallons/mile rather than miles/gallon gives a person a much clearer picture of fuel savings.

There is a math illusion here,” said Richard Larrick, a management professor at Duke University, whose research appears in the journal Science.

Larrick said most people think improvements in miles per gallon are all the same, where a 5 gallon per mile improvement would yield the same gas savings in a car that gets 10 miles per gallon or 20 miles per gallon. (One mile equals 1.61 kilometers, and one U.S. gallon equals 3.79 liters.)

“The reality that few people appreciate is that improving fuel efficiency from 10 to 20 miles per gallon is actually a more significant savings than improving from 25 to 50 miles per gallon for the same distance of driving,” Larrick said.

Larrick experimented on college students, giving them a small test of car choices with fuel efficiency expressed in miles/gallon. Students had problems determining the greatest gain in fuel efficiency.

When he turned it around to gallons/mile, the change in fuel efficiency was obvious

To help you out, here’s a conversion table Larrick’s team developed.

29 years ago, then President, Jimmy Carter, told Americans the energy crisis was:

“a clear and present danger to our nation” and drew out a plan to address it.

Listen here to today’s story:

He was so ahead of his time.

Oil futures settled lower Wed. - now down about $10 in two days ($10.58 to be exact). Is it a long-term shift in sentiment, or a brief correction? Inquiring minds want to know.

“I think anyone you talk to would have to be surprised by the magnitude of these huge price swings. This is extreme price volatility that no one can predict,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. Such large up-and-down swings, he added, can indicate the market is nearing its top.

The EIA reported US crude supplies rose by 3 million barrels last week. Analysts were predicting a 3 million barrel draw. Gasoline supplies also rose unexpectedly.

Now the bad news. It always takes some time for these declines to show up at your local filling station. Prices at the pump rose a half a cent to $4.114/gal. according to AAA. Diesel up a penny to $4.839/gal.

Keith Johnson writing for the WSJ Environmental Capital Blog discusses the good question: Does McCain or Obama win with $4 gas?

Ron Klain writing in the NYT says it is a no-brainer.

“If gas is still more than $4 a gallon on Election Day, there is no way a Republican will continue to control the White House.”

But not so fast! A lot of people blame the Democrats for the self-imposed production limits, and want to lift the ban on offshore drilling as proposed by McCain.

Offshore and Alaskan drilling would not really make a big diff in oil and gas prices for the next decade, but the point is we would be doing something. In politics, perception can be just as good as reality.

Not such a no-brainer after all, is it?