Wed May 21, 2008


 By Robert Mentzer • Wausau Daily Herald • May 18, 2008

For nearly 20 years, American consumers have paid whatever was asked to fill their tanks with gasoline rather than shift driving habits. We've continued to drive just as much as ever -- or more -- as the price per gallon rose to $1.50, then broke the $2 mark, then $3.

"People can't really change their behavior that much in the short run," said Laurie Falter, an analyst for the federal Energy Information Administration, or EIA. "People can't say, 'Gas prices went up 10 or 20 cents, so I'm not going to go to work anymore; I'm not going to drive my kids to school anymore.'"

But this year, the EIA is projecting that U.S. consumers will reduce the amount of gasoline they use. Aside from a "blip" in 2001, Falter said, the last time demand for gasoline actually declined was in 1991, suggesting that with local prices at nearly $4 a gallon we could be at the edge of a real shift in the way we think about fuel consumption.

Budget strains

The dip in demand could also be a signal that U.S. consumers have for the first time reached the point at which their budgets no longer can absorb the steady rise in fuel prices. People already are making changes such as eating fewer meals in restaurants and taking fewer weekend trips out of town. What remains to be seen is whether those short-term measures will lead to long-term cultural and lifestyle changes.

"Every time the gas prices go up, we continue to adjust," said Marnie Ficociello, 38, who lives in Poniatowski and commutes to Wausau, where she and her husband own the restaurant Uptown Grill. "As it continues getting more and more expensive, we continue making decisions about our lifestyle, our working in Wausau and driving the vehicles we drive."

Based on median income and estimated monthly fuel costs, in 2002 the average Marathon County resident spent about 2 percent of his income on fuel for each vehicle he owned, according to Oil Price Information Service. By 2007, that share had doubled to 4 percent of a resident's income per vehicle.

Gas prices continue to rise sharply while Wisconsin's median income is slightly dropping, so that trend appears unlikely to reverse unless people make drastic lifestyle changes.

"We don't know how much cushion any particular individual has," said professor Randy Cray, director of the Central Wisconsin Economic Research Bureau at the University of Wisconsin-Stevens Point. "What we can say is there must be people in the population who will be adversely affected enough that they would have to cut back on (driving)."

And those with lower incomes feel the pinch first, Cray said.

"It's almost like a trickle-up effect," he said. "As gas becomes more and more expensive, that discretionary power over spending for gasoline creeps up and up and up in terms of the income distribution."

Contributing factors

Slowed economic growth is another factor driving down demand for gas, as consumption typically falls during a recession. That poses a chicken-and-egg problem for consumers: As a larger share of people's incomes is devoted to gasoline, they are left with fewer dollars to put into the economy.

Drops in demand have been small and will continue to be small in the near term, said Daniel J. Weiss, an energy analyst at the think tank the Center for American Progress. And because the global demand for oil is rising as a result of higher consumption rates in China, India and other developing economies, a small decrease in U.S. demand will not dramatically affect the price of gas here.

"Because there are not other (transportation) options right now, it has a huge economic toll on households," Weiss said. "If you wanted to use high prices as a way of reducing demand, you would have to introduce them slowly, and you would have to present people with alternatives."

Time to choose

Many central Wisconsin residents already are changing their behavior.

"I have a Chevy Avalanche I haven't filled up in two months," said Mark Fitzke, 38, of Stettin. "I don't drive it unless I absolutely have to."

Fitzke bikes to work and uses a recently purchased scooter to motor around town. He said he thinks perceptions of such forms of transportation are changing as high gas prices lead residents to look for alternatives.

Real changes may be near, said the EIA's Falter.

"Even now we're starting to see ... a lot of incentive for people -- private entrepreneurs or businesses, even fuel companies -- to try to come up with some new innovations."

Other long-term changes in the way central Wisconsin residents travel -- light rail infrastructure, introduction of new technologies or a cultural shift away from vehicle-dependence -- would take years, even decades, to achieve. In the meantime, Cray said, residents will continue to face the same tough economic choices they have been dealing with as prices have climbed in recent years.

"When one thing goes up in price, they have to make a decision," Cray said. "Do you cut back on gasoline? Or, if you need it, what do you cut back on?"


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Posted By:GoGreenCW
on Wed May 21, 2008 2:54 pm