$4 gas reinforces trend toward lower U.S. fuel consumption

April 18, 2012
Washington Post
Steven Mufson

Are American motorists finally changing their gas-guzzling ways?

As prices have neared and in some cases topped $4 a gallon, drivers have cut their consumption of gasoline to its lowest levels in a decade, driving less and buying cars that are more fuel-efficient.

The average price of gasoline could surpass $4 per gallon nationwide as early as this week. It's already $3.93 per gallon, a record for this time of year. (April 9)

Jack Gerard, president of the American Petroleum Institute, is no shrinking violet when it comes to his defense of Big Oil, and his opposition to the president’s policies.

Oil experts say American Petroleum Institute’s theories on U.S. production don’t always hold together.

The adjustment has slowed the climb in gasoline prices, which until last week had risen for 10 consecutive weeks, and could preserve some money for Americans to spend on other items as the economy struggles to recover more convincingly.

“Over the last four weeks, motor gasoline product supplied has averaged 8.6 million barrels per day, down by 4.0 percent from the same period last year,” the Energy Information Administration (EIA) said last week.

In the Washington area, there has been an increase in applications for carpooling under the Commuter Connections program, which links people seeking to share rides. Applications rose 20 percent last year and 10 percent in January and February, in each case closely tracking the increase in gasoline prices, according to Ronald Kirby, director of the department of transportation planning for the Metropolitan Washington Council of Governments.

The response to $4 gasoline is reinforcing a trend toward lower fuel consumption. This will be the third year in the past five with historically high oil prices. Even before the latest price spike, gasoline consumption had dropped 6 percent from 2007 through 2011, the EIA said.

The Federal Highway Administration adds that the number of vehicle miles driven over a 12-month period ending January was lower than in any year since 2004.

‘A new mind-set’

These may be signs that consumers are adapting to $4 gasoline, that may explain why retail sales are advancing in the face of high pump prices.

“I think that there is a little bit of a new mind-set that has happened with our customer over the last five years,” Charles Holley, Wal-Mart’s chief financial officer, said at March retail conference. “I think $3, $3.30 whatever it is would have been a disaster, as you know, four or five years ago. Today, I think the customer has probably reset expectations and their budgets around that higher gas price.”

With President Obama’s imposition of stricter fuel-efficiency standards, it’s possible that U.S. petroleum use — which is mostly for transportation — has peaked and might decline gradually even as economic growth resumes.

That’s good for people’s pocketbooks.

Gasoline purchases made up 4 percent of total consumer spending last year, notes Mark Zandi, chief economist of Moody’s Analytics. That’s more than the 2.3 percent level when crude oil prices cratered in 1998, but it’s a lot less than the 6 percent level in 1981 when an earlier oil price shock rocked the economy.

“I’ve been surprised, at least so far, that $4 a gallon hasn’t done more damage,” Zandi said. “So far, it doesn’t seem to have done any.” He said the improving job market was one reason. Another is that the warm winter lowered people’s heating bills and balanced out total household energy costs.

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