Posted on 08/16/2005 4:29:30 PM PDT by RockinRight
Soaring gasoline prices are getting a rise out of many U.S. motorists, but by and large they're not getting in the way of summer vacations, commuting habits or SUV sales.
What if gasoline prices, which have risen to $2.55 a gallon, keep climbing?
Diana Amaro, of Denver, said that if gas reached $3 a gallon, she'd consider taking the bus. Ray Sykora, of Yuba City, Calif., said pump prices would have to exceed $4 a gallon before he hopped on public transportation.
No matter how much motorists shake their heads in disgust at record pump prices, fuel consumption isn't expected to plummet anytime soon. Spending on other goods and services is likely to suffer first, economists said, partly explaining why U.S. financial growth has been slower in 2005 than the previous year.
The latest Energy Department data show regular unleaded gasoline averaging $2.55 a gallon nationwide, or 67.5 cents above year ago levels. At the same time, daily gasoline demand is up 1 percent compared with last year.
Almost two-thirds of those surveyed for an AP-AOL poll said they expect fuel costs to cause them financial hardship. That was up from April, when only about half felt that way. Still, there is little evidence that this has led to meaningful changes in driving habits.
Experts point to a wide range of reasons why U.S. consumers and businesses have, in aggregate, absorbed higher energy prices and maintained a healthy appetite for fuel.
On an inflation-adjusted basis, oil futures would need to exceed $90 a barrel, and retail gasoline prices about $3 a gallon, in order to match the all-time highs set about 25 years ago. And in the past 30 years, the economy has become about twice as efficient energy-wise due to conservation efforts, improvements in technology and the shrinking of the manufacturing sector, among other factors.
In the April-June quarter, when oil prices regularly hovered above $50 per barrel, the U.S. economy grew at a 3.4 percent annual rate.
This solid economic growth is important to understanding America's resiliency in the face of rising energy prices, said Citigroup Smith Barney senior economist Steve Wieting.
While U.S. consumers spent $50 billion more on home and vehicle energy in 2004, total disposable income grew by almost 10 times that amount, Wieting said.
"This has been a siphon for us, but we've still kept a lot of water in the boot," Wieting said.
Another mitigating factor is that the steep rise in oil prices has occurred gradually, giving families and businesses time to adjust their budgets and mindsets.
A 50-cent-per gallon increase in the price of gasoline amounts to just $5 for every 10 gallons, the average weekly per-vehicle consumption in the U.S., according to John S. Herold, a Norwalk, Conn.-based energy consultant.
Still, Wieting said he has been mystified by motorists' continued love affair with SUVs and trucks. Ford, Chrysler and GM all said strong July sales were led by trucks, fueled by sales incentives.
Despite the small-but-growing market for hybrid-electric vehicles, "consumers clearly want large inefficient vehicles," Wieting said.
None of this detracts from the fact that many Americans, particularly those with fixed or low incomes, are feeling the pinch. But there are often few significant, affordable changes that can be made overnight, economists said.
"If somebody lives 20 miles from where they work and they have an SUV, they can't do very much about that in the short run," said Stephen P. Brown, an economist at the Federal Reserve Bank in Dallas. The savings from switching to a hybrid-electric vehicle would be negligible when the cost of the new car is factored in, he said.
Brown believes an average price of $3 a gallon will spur more fuel conservation, perhaps in the form of carpooling, but he and other economists said consumers were more likely to cut back their spending on food and trips to the mall first.
"You and I are locked into our daily commutes and it's pretty difficult for most of us to switch and dramatically alter the way we get to work and get to the grocery store," said William Veno, a fuel expert at Cambridge Energy Research Associates in Cambridge, Mass. Veno said 40 percent of all gasoline consumption in the U.S. is tied to commuting.
Migration out of urban areas increases gas usage, while the rise in employment is putting more Americans back on the road, he said.
Also, energy-intensive industries such as airlines and trucking are gulping more fuel due to higher demand, in spite of their efforts to operate more efficiently.
Some consumers are cutting back as best they can.
Home builder Tim Sullivan of Centennial, Colo., considers his Ford F-250 his office. He often clocks more than 200 miles a day visiting construction sites in the Denver suburbs, but no longer lets his truck idle when he's checking on work crews.
But the extra driving is worth it.
"The price of gas is totally outweighed by the selling of the homes," said Sullivan, who added that he would not let the extra cost of fuel get in the way of vacations or other recreational activities.
Some gasoline retailers said they have noticed falling sales.
Jay Ricker, president of Ricker Oil Co., in Anderson, Ind., said sales are down anywhere from 6 percent to 10 percent compared with last year at the 30 retail outlets he operates. But, he acknowledged, that might also reflect the rising popularity of so-called hypermarts, such as Wal-Mart and Costco, which sell gasoline cheaper to attract customers to their stores.
In blue-collar cities like Muncie and Fort Wayne, "people are watching their pennies very closely," he said.
My motorcycle gets more than casual usage as well. If it ain't raining, that's what I take to work.
SUVs fault!
How 'bout them 40-foot motorhomes?
Well, we're just 20-cents shy, here in West Michigan, from the magic $3.00 a gallon with current prices at $2.80 a gallon.
Buy a more fuel efficient American made car, and you'd be spending the money here, instead of sending it to our Saudi (Friends?).
Problem is, nobody is like you. This is evidenced by the fact that one can drive around in any city in America during "work hours" and see millions upon millions of people driving around, who obviously don't work. Not to mention all that weekend traffic and late night traffic jams in CA..
This current high and rising prices of fuel is really puts a heavy burden upon the moderate to low income working middleclass who have to commute.
Let gasoline prices sit at the present level for a couple of weeks. All this alarm will drop off the radar.
You only drive your car about 8 miles a day?
Them too ;-)
Especially those whose only vehicle is a 5 yard dump truck.
One, the speed vs economy curve is different for every vehicle. That particular vehicle does best at 55mph and 25% worse at 75, but that doesn't mean every vehicle will.
Two, that graph is a textbook example of how to lie with statistics. The range begins at 15mpg, so a roughly 25% drop in real numbers (from 30 to 23 mpg) is represented by a roughly 50% drop on the graph (from 15 units above the X-axis to 8 units.)
Three, a 100 mile trip in this hypothetical car at 55mph and 30mpg takes 1 hour and 49 minutes and burns 3.3 gallons of gas. At 75mph and 23mpg the same trip takes 1 hour and 19 minutes and burns 4.3 gallons of gas. $2.50 of gas to save half a hour sitting in a cramped car is a good trade off to me.
Ugh....typo...about $7.50/DAY. About 3.5 gallons to go about 90 miles roundtrip, based on $2.50/gal gas. Only work that far 3 days a week. So $22.50/week. We use the van for local shopping, etc...we are 8 miles from town and don't go in every day if we can help it.
Sorry...was posting too fast.
No problem. I thought 8 miles a day pretty low. I only wish I could drive that little.
Three, a 100 mile trip in this hypothetical car at 55mph and 30mpg takes 1 hour and 49 minutes and burns 3.3 gallons of gas. At 75mph and 23mpg the same trip takes 1 hour and 19 minutes and burns 4.3 gallons of gas. $2.50 of gas to save half a hour sitting in a cramped car is a good trade off to me.
Another good point.
Of course for those working near minimum wage, "earning" $5.00/hour in gas savings isn't that bad. So it probably is worth to to them drive 55mph instead of 75mph to work.
But I'd also be interested in seeing what the increase in demand for gas does to the total price for gas. If everyone were to drive 55mph instead of 75mph, consumption would drop and the reduced demand for gas would lower the overall price per gallon so the savings would be greater.
Of course a single individual driving at 55mph would have little to no effect on prices, but a whole nation slowing down and reducing demand would.
In Toledo-local TV news tonight. Volunteers who deliver "meals on wheels" to the elderly & disabled may have to stop soon, as they have to buy their own gasoline. It's slowly beginning.
Gas is still relatively cheap in historical terms. That is one reason why the price is spiking up so much.
We can thank mostly the envirowackos for this scenario. They jump up and down, and hold their breath until they turn blue every time someone wants to build a refinery. They have cost this country millions of dollars in expensive and unnecessary regulations. We need to drill ANWR. We need to build refineries. We need to renovate existing refineries. We need to expand drilling off the coast of Florida and California. We need to put an end to the expensive summer blends that cause short term supply problems. We need to tell the envirowackos to stuff it.
There are plenty of alternatives.
Trade in the SUV for a more efficient car.
Cut back on road trips, take public transit more etc.
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