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View Full Version : $3 gas: America's braking point


Donger
12-18-2007, 11:08 AM
http://money.cnn.com/2007/12/18/news/economy/gas_demand/index.htm?cnn=yes

NEW YORK (CNNMoney.com) -- Gasoline demand has fallen for the first time in years as drivers appear to recoil from near-record prices, throwing doubt on America's seemingly insatiable thirsts for fuel.

Although growth in gasoline demand has been slowing all year, demand has actually fallen for five of the last six weeks compared to the same time last year, according to retail sales data gathered by MasterCard SpendingPulse, a research report that tracks gasoline sales using MasterCard, other credit cards, and cash sales at approximately 140,000 service stations service stations around the country.

"With prices over $3 a gallon, there seems to be some real resistance from the consumer," said Michael McNamara, director of research for MasterCard SpendingPulse.

In some weeks demand has fallen by as much as 3 percent.

Although the public has seen $3 gasoline before, 2007 has been different. Where previous price spikes were short-lived, this one seems to be here to stay.

Another reason demand is falling could be due to a slowing economy, or even fears of a recession.

Since topping $3 back in April, gasoline has stayed consistently high, with the nationwide weekly average price never dropping below $2.70 a gallon, according to the Energy Information Administration. For 19 of the last 33 weeks, gasoline has averaged over $3 a gallon.

The first time in recent memory that gasoline prices hit $3 was September 2005, following Hurricane Katrina, and then once again in the summer of 2006. (gasoline prices were also over $3 in the early 1980s, adjusted for inflation.)

Analysts reported a slight drop in consumer demand growth following each of those spikes, but they where short lived. Gasoline eventually returned to the low $2 range and demand quickly resumed its normal rate of growth of around 1.5 percent per year.

Fuel efficiency and the American driver

For the last few months gasoline demand growth has been relatively flat, according to the EIA. This drop in demand is a main reason why gasoline prices didn't follow oil prices to a new all-time record last month.

"Gasoline demand does not usually fall," said Geoff Sundstrom, a gasoline price analyst at the motorist organization AAA. "It could be the start of a trend."

Gasoline is one of those items that some economists consider "inelastic," that is, people will buy it no matter what the cost. But the recent drop in demand puts that into question, and suggest people will cut out unnecessary trips if they are too expensive.

"There is some level of [gasoline] buying that has to occur, people have to get to work," said McNamara. "But not every trip is non-discretionary."

Sundstrom also said they have seen fewer sales of pick-up trucks and large SUVs since gasoline crossed the $3 mark back in 2005, and more sales of so-called "cross-over" SUVs, which are a mix between a car and a traditional SUVs.

RIP for the SUV

That could mean people are buying more fuel efficient vehicles, which is beginning to show up in the demand numbers. But McNamara noted gasoline demand was strong when prices fell from $3 a gallon in 2005 and 2006.

Sundstrom noted that other times when demand has fallen - like after Sept. 11, 2001, from 1980 to 1981, and from 1974 to 1975 - coincided with recessions.

But he pointed out the U.S. economy is much less energy intensive than it was in the 70s and 80s, meaning a drop in energy use may no longer signal a looming recession.

Economists also weren't ready to call the recent drop in demand a death blow for the economy.

"I think its more an indication of how we're using gasoline than a recession story," said Jim Glassman, a senior economist at J.P. Morgan.

[Demand] has been weak for months," said Chris Lafakis, an associate economist at Moody's Economy.com, an economic consultancy, noting that the economy has continued to chug along, albeit at a slower pace. "This doesn't raise the specter of recession." To top of page

Bowser
12-18-2007, 11:09 AM
I hate Big CNNmoney.com.

Donger
12-18-2007, 11:14 AM
What do you say, folks? Are you voluntarily doing less driving now than you were a year ago?

Donger
12-18-2007, 11:15 AM
I hate Big CNNmoney.com.

I get a dollar every time someone uses that.

Bowser
12-18-2007, 11:16 AM
What do you say, folks? Are you voluntarily doing less driving now than you were a year ago?

I just drive slower in a hybrid.

SUCK ON THAT, BIG OIL!!

Bowser
12-18-2007, 11:16 AM
I get a dollar every time someone uses that.

Heh. At least something good comes out of ridiculous gas prices, eh?

Donger
12-18-2007, 11:17 AM
I just drive slower in a hybrid.

SUCK ON THAT, BIG OIL!!

Good for you. That's great. Every time I see a hybrid, it's going faster than everyone else.

Cochise
12-18-2007, 11:24 AM
In the longrun this is probably a good thing. Shift people out of monstrous vehicles they don't need, get manufacturers to make more efficient cars, lower our national need for oil. Encourage development of alternative power sources.

Bowser
12-18-2007, 11:26 AM
In the longrun this is probably a good thing. Shift people out of monstrous vehicles they don't need, get manufacturers to make more efficient cars, lower our national need for oil. Encourage development of alternative power sources.

I don't like your tone.

Donger
12-18-2007, 11:27 AM
In the longrun this is probably a good thing. Shift people out of monstrous vehicles they don't need, get manufacturers to make more efficient cars, lower our national need for oil. Encourage development of alternative power sources.

I have a funny feeling that crude prices are going to drop. and possibly drop hard.

Bowser
12-18-2007, 11:28 AM
Good for you. That's great. Every time I see a hybrid, it's going faster than everyone else.

Yeah, OK. I'm FOS. The only thing I have changed is that I don't go running off to wherever when my pre-teen daughter insists she needs the coolest new thing from the store. That's probably good on a few levels.

And I'm still more likely to pass than be passed.

StcChief
12-18-2007, 11:28 AM
What do you say, folks? Are you voluntarily doing less driving now than you were a year ago?
just last year? how about two years ago.

Bowser
12-18-2007, 11:29 AM
I have a funny feeling that crude prices are going to drop. and possibly drop hard.

Honestly? Care to elaborate, because I don't think I share your optimism.

Donger
12-18-2007, 11:29 AM
just last year? how about two years ago.

Last year was just a token example, since prices are $0.70/gallon higher now than they were a year ago.

Donger
12-18-2007, 11:30 AM
Honestly? Care to elaborate, because I don't think I share your optimism.

Just a gut feeling.

Bowser
12-18-2007, 11:32 AM
Just a gut feeling.

I get those. It's usually just gas.

But I hope you're right, unlike the $4 dollars at the pump prediction. ;)

Donger
12-18-2007, 11:35 AM
I get those. It's usually just gas.

But I hope you're right, unlike the $4 dollars at the pump prediction. ;)

Huh? I didn't agree with that prediction.

Cochise
12-18-2007, 11:39 AM
I wonder if opec will increase production. Drop the price trying to keep our dependence, try to lower the incentive to replace oil with other energy sources.

Donger
12-18-2007, 11:41 AM
I wonder if opec will increase production. Drop the price trying to keep our dependence, try to lower the incentive to replace oil with other energy sources.

As long as other countries are picking up the slack, I doubt it. Then again, we do have some influence with them.

Bowser
12-18-2007, 11:42 AM
Huh? I didn't agree with that prediction.

My bad. I'm just glad we don't have to pay 4 bucks for a gallon of gas.

QUIT TRYING TO DEFUSE MY LAME ATTEMPTS OF HUMOR.

Or humour, whichever.

Psyko Tek
12-18-2007, 11:42 AM
drop it down fast and then slowly crawl it back up to just a little higher
rinse and repeat

Calcountry
12-18-2007, 11:47 AM
I have a funny feeling that crude prices are going to drop. and possibly drop hard.The customer has hit the F*** You point.

We have hit 3.30/gallon twice in the last 12 months and both times the price started reluctantly going back down. IOW, the average customer has just said FU, we don't give a damn if oil is scarce or not, we just can't pay this.

It is happening, heck, even the panhandlers are having to come up with a new gig cause the gas station across the street is empty all the time.