Driving instructors

Gas prices are forcing many to rethink driving and spending

KATY, Texas — Most Americans would happily pay the $4.29 for a gallon of regular gasoline that Buc-ee was charging this week on Interstate 10 between Houston and San Antonio, more than 50 cents below the national average .

But with prices more than $1.50 a gallon higher than they were a year ago, even Texans are complaining and changing their buying habits to get by.

“It makes me feel so stressed just thinking about buying gas,” said Nancy Oncken, a retired kindergarten teacher, as she filled her station wagon en route to join five cousins ​​in a water park outside of San Antonio for the long weekend. “It’s now always on my mind to be careful about what I buy.”

When Ms. Oncken walks through Buc-ee’s, the well-known Texas-wide convenience store with enough gas pumps to fuel an army, she often buys a souvenir bumper sticker, tumbler or keychain adorned with the beaver. toothbrush wearing a baseball cap. . But this year, she says, she will keep a grip on her wallet.

Drivers will get a little break this July 4 weekend now that gasoline prices are down about 15 cents per gallon over the past two weeks. But with the Russian invasion of Ukraine settling into a bitter war of attrition, limiting global energy supplies, gas prices are unlikely to fall much further this summer.

At $4.84 a gallon on Friday, the national average price for regular gasoline was $1.72 higher than a year ago, according to the AAA auto club. Fuel prices are changing shopping habits and there are early signs that people may be rethinking their driving.

Economists report that travel spending remains strong this year due to pent-up demand after two years of the Covid-19 pandemic. But interviews with drivers at Buc-ee’s in Katy, Texas, suggest consumer confidence is beginning to erode under the pressure of high fuel, food and housing prices. Ms Oncken and several others have said the holiday weekend may be the only holiday they take this summer, a clean break from the past.

A recent report from Mastercard SpendingPulse, which monitors national retail sales, showed that despite gas prices rising about 60% from last year, total spending at gas station convenience stores rose just 29%, suggesting that many like Ms Oncken are compensating for gas prices by saving on small, fancy indulgences.

“Opting for a lower grade of fuel, driving a little less, or skipping that slush or candy bar in the store are part of a larger picture of choices consumers make every day in the face of higher prices,” said Michelle Meyer, US Chief Economist. at the Mastercard Economics Institute.

The shock is particularly acute given that people have become accustomed to low gasoline prices during the pandemic, when oil prices crashed due to reduced travel and other economic activity.

It will take several months, at least, to untangle all the effects of rising prices on consumer behavior. People are spending more in restaurants than a year ago and sales of luxury goods remain high, according to Mastercard. But hotel industry executives say many of those who drive on vacation are choosing destinations closer to home to save gas.

This may be one of the reasons for the modest drop in gasoline prices in recent weeks. Recent data from the Department of Energy suggested that the volume of gasoline sold nationwide fell 2% or more from a year earlier. And Houston auto dealers said customer interest in more fuel-efficient cars, as well as electric and hybrid vehicles, was growing, though parts shortages have limited the supply of new models.

Some transport and energy experts say demand for gasoline has fallen partly because more people are flying rather than driving on holiday this year than last, although rising fuel prices tickets and airport delays could reverse this trend as the summer progresses. In some cities, more and more people are returning to public transport due to concerns about Covid easing.

Inflation and a slowdown in certain sectors of the economy may mean that some companies are reducing their shipments or shortening their supply chains when possible to save fuel.

Giovanni Circella, a transportation expert at the University of California, Davis, said that over the years short periods of high gas prices hadn’t fundamentally changed driving habits because people still had to commute to work and perform daily tasks such as shopping and driving their car. children in school and activities.

“But what will change is that if gas prices remain high for an extended period, Americans will start to change the type of cars they drive,” he said.

A report released this week by RBC Capital Markets found that over the past 30 years, U.S. retail gasoline prices have risen more than 30% year over year for 39 months. individual. In those months, demand fell 2% or more from a year earlier only 12 times. “In short, prolonged demand destruction events have historically been rare,” the RBC report concluded.

Currently, a relatively small 3.5% of Americans’ total spending is spent on fuel, according to the same RBC report. This is slightly lower than the average of 3.6% for the past 30 years.

“The real risk to oil demand and prices is when you start to see the economy slow down,” said Mark Finley, an energy economist at Rice University.

Mr Finley added that despite being a relatively small part of a family’s budget, high petrol prices had an outsized impact on consumer confidence. “There’s a sense of crisis with people saying, ‘There’s something wrong here, and I need to be more careful,'” he said.

Energy experts say the costs multiply for low-income families, especially those in rural areas, as they typically have older, less fuel-efficient cars and drive longer distances to work. Gasoline expenditures can consume up to 10% of these families’ income.

Rising oil prices depend on many factors, some of which offset each other. Political unrest in Libya and Ecuador is cutting global supplies, although President Biden may persuade Saudi Arabia to produce more oil on his next trip to the Persian Gulf. If China succeeds in controlling its Covid epidemic, its appetite for oil could grow and supply to the market, but this is not a certainty.

And the course of the war in Ukraine could determine the abundance of Russian oil supplies on world markets.

If August and September hurricanes damage Gulf Coast refineries and pipelines, fuel prices could skyrocket.

U.S. gasoline and diesel inventories at the end of June were at their lowest seasonal levels in more than a decade, largely due to the closure or retooling of several refineries over the past two years.

This complicates matters for Brenda Davis, an insurance client manager from San Antonio, who stocked up on Katy the other day. Passing by Buc-ee’s, she usually picks up a Mud Pie dish to add to her dining set, but this year she said she would resist.

“I try to fill my budget,” she said. “The prices are ridiculous.”

Lydia De Pillis and Ben Casselman contributed report.