NYTimes.com Article: Laissez-Faire My Gas Guzzler, Already
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Laissez-Faire My Gas Guzzler, Already
September 7, 2004
By SIMON ROMERO
"I don't like gas being this expensive," said Paul
Kaesberg, an oncologist at the University of Wisconsin
Hospital and Clinics in Madison who routinely pays $1.90 a
gallon. "My driving is integral to my job, it's integral to
my pleasure in life. I won't cut back on that. I might cut
back on other things."
Dr. Kaesberg, whose 2004 Acura sport utility vehicle gets
18 miles to the gallon, is typical of consumers who started
the summer with the shock of $2 a gallon gas, but
resolutely kept driving. Even though oil prices have
increased 30 percent in the last year, the nation's gusto
for gasoline has not been shaken.
Over the Labor Day weekend, for example, about 28.7 million
of the 34.1 million Americans traveling more than 50 miles
from home were expected to be driving, a 2 percent increase
from last year, according to AAA, formerly known as the
Automobile Association of America.
The economy, of course, has felt an impact from higher
energy prices. Many companies, including airlines and
trucking fleets, have started tacking on surcharges to
compensate for higher fuel costs for their services,
effectively passing on the costs to consumers. That, in
turn, has contributed to spurts of inflation over the
summer. Manufacturers and retailers say higher energy costs
remain a threat, even as manufacturing activity remains
Some symbolic shifts in buying practices have also cropped
up. Consumers are buying fewer Hummers while sales of
hybrid vehicles are climbing; recreational boaters are
opting to share their boats with friends instead of using
two small vessels for an outing. But for the most part,
Americans are not altering their fuel-consumption habits as
they pay some of the highest prices ever for gasoline.
Purchases of items other than fuel do appear to be
weakening, however, a familiar development during periods
of rising energy prices. On Thursday, retailers reported
weaker-than-expected sales in August, with sales rising
just 1 percent in the month, as companies including
Wal-Mart warned that earnings would fall short of
Still, such figures suggest that Americans are forgoing
purchases of everyday items so that they can continue to
drive as much as possible.
The four-week average for gasoline demand for the week
ended Aug. 27 was 9.421 million barrels, essentially
unchanged from the period a year ago, according to the
Energy Information Administration.
Part of the explanation is because gasoline prices actually
declined during the summer, to a national average of about
$1.86 a gallon, from a record of $2.05 in May, while
frenzied trading in financial markets pushed the price for
a barrel of oil to nearly $50 from $40. (The price of crude
oil is still far from its inflation-adjusted peak of about
$80 reached in 1980.) That is because refineries in the
United States produced ample amounts of gasoline in the
last three months, meeting demand from consumers even as
speculators placed bets on future swings in the price of
oil that may have had little to do with actual petroleum
"I don't think we're going back to $50 without a big supply
disruption somewhere," said Juha Laiho, a Houston-based oil
trader for Fortum, a Finnish oil company. "It's logical for
gasoline to pull back a bit."
Of course, gasoline at $1.86 a gallon remains about 10
cents a gallon more expensive than at this time last year,
according to the Energy Information Administration,
crimping many drivers. Still, it would have to become much
more expensive to instill a big change in driving habits.
Rebecca Lindland, a senior analyst for the automotive
industry at Global Insight, estimates that gasoline prices
would have to climb to a nationwide average of $3 a gallon
for at least six months to alter consumer behavior.
"Gasoline is still incredibly affordable," Ms. Lindland
said. "Even with inflation it's not much more expensive
than it was five years ago."
Some consumers are feeling the pinch, however. Michael
McMillan, a firefighter in Los Angeles who makes the
104-mile round-trip commute three days a week from his home
in Mission Viejo, Calif., said the price of gasoline was
behind his decision to trade a Mitsubishi Montero sport
utility vehicle for a Volkswagen Jetta, which gets almost
double the gas mileage.
"I was really looking for something more economical for the
drive," Mr. McMillan, 38, said. But judging from the
parking lot at his station, he said: "You'd think there are
no gas problems at all. You have a half dozen-plus
jacked-up trucks back there on steroids."
Seeking out energy-efficient vehicles still seems to be the
exception rather than the rule. Sales of recreational
vehicles, for instance, climbed 14 percent in the first
half of the year from the period in 2003 and rental
reservations for the vehicles made in the early summer were
up 34 percent from last year, according to the Recreation
Vehicle Dealers Association in Fairfax, Va.
"People work too hard to let even $50 extra in gas prices
stop them from taking their vacations," said Phil
Ingrassia, a spokesman for the association.
At convenience stores, which sell about 75 percent of the
nation's gasoline, consumers are using credit cards for
about 60 percent of fuel purchases, a 20 percent jump from
last year, according to the National Association of
Convenience Stores. Jay Ricker, who owns 31 convenience
stores in northeastern Indiana, said he had seen little
impact on purchases in his stores because of higher
"There's a lot of grumbling, of course, but unless the
price gets to $3.50 a gallon behavior won't change," said
Mr. Ricker, who added that he preferred lower gas prices so
customers could continue buying higher-margin products at
his stores. Gasoline in Indiana now costs about $1.75 a
Some parts of the economy that depend heavily on oil are
having a hard time. Airlines, for example, are struggling
to find ways to cut fuel expenses that are expected to cost
them $6 billion more this year than last year. Airlines are
doing everything from taxiing out to the runway on one
engine to cutting the amount of reserve fuel they keep on
aircraft in case of delays.
American Airlines, a unit of AMR, said its fuel expenses
would be $1 billion more this year than it expected, and
$300 million more in the third quarter alone, a reason why
it is joining Northwest Airlines in charging passengers $5
a ticket for trips booked through its reservations agents
and $10 for those bought at airports. American said that
would raise $25 million in revenue, hardly a dent in its
Fierce competition among airlines, however, has prevented
the companies from making fuel surcharges stick through
ticket price increases. Some low-fare carriers, including
JetBlue Airlines, are better protected from rising fuel
costs. David Neeleman, JetBlue's chief executive, told
analysts this summer that the airline expected to cut its
costs per available seat mile about 2 percent in the third
quarter, even with higher fuel prices. That is because
JetBlue hedged about 75 percent of its fuel purchases for
While certain areas of the economy seek to adapt to higher
energy costs, such efforts are lost on most drivers. Julie
Battistelli, 51, a nurse from Saugus, Mass., said she
shunned public transportation, preferring instead to drive
a BMW sport-utility vehicle acquired in April that costs
about $10 a day in gasoline. "I have to have a car; I have
a little girl I have to drive everywhere," Ms. Battistelli
said. "In the suburbs you have to drive."
Reporting for this article was contributed by Micheline
Maynard in Detroit, Katie Zezima in Boston, Aaron Nathans
in Madison, Wis., and Chris Dixon in Los Angeles.
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