Gas Prices Are Making Some Consumers Alter Their Behavior
The increase in gas prices could cost the average household up to $2,000, but older consumers are more likely to reduce shopping and dining out than younger consumers.
With the national average for a gallon of gasoline still well above $4, it appears that many Americans are trying to come to terms with this new reality. Part of that includes changes in consumer behavior.
According to AAA, demand for gas is “defying seasonal trends” and is trending lower, perhaps in response to higher fuel prices.
“Usually this time of year, with warmer weather and longer days, we’d see an uptick in gasoline demand as more people hit the road,” said AAA spokesman Andrew Gross in a press release. “But we had a slight drop in demand last week, which may be due to higher pump prices. In our new survey of drivers, 59 percent said they would change their driving habits or lifestyle if the cost of gas hit $4 per gallon. And if gas were to reach $5, which it has in the Western part of the country, three-quarters said they would need to adjust their lifestyle to offset the pump price.”
There are also some key differences among age groups. The survey showed that 18- to 34-year-olds are almost three times as likely as those 35 and over to consider carpooling (29 percent vs. 11 percent). Moreover, those aged 35 and over are more likely to favor combining trips and errands (68 percent vs. 52 percent) and to reduce shopping or dining out (53 percent vs. 43 percent).
Demand Destruction
Vectis Energy Partners principal Tamar Essner recently told Yahoo Finance Live that demand destruction could be occurring right now due to high gas prices.
“We’re seeing that consumers are having real sticker shock,” he said. “And the question is: Does the sticker shock translate into actual demand destruction? And we think in certain parts of the economy that’s already happening. In certain parts of the world, that already is.”
However, Lipow Oil Associates president Andrew Lipow told Yahoo! that “gasoline prices have to rise to about $4.75 to $5.00 a gallon in order to get a significant amount of demand destruction.”
$2K Hit to Wallets
The pain at the pump isn’t expected to reverse quickly. Patrick De Haan, head of petroleum analysis at GasBuddy, recently said that “it’s a dire situation and won’t improve any time soon.”
According to CBS News, that pain amounts to about $2,000 in annual costs to a typical household budget.
“That comes on top of about $1,000 in extra costs at the grocery store due to inflation, which means the typical household will have $3,000 less this year to spend on other items,” the news outlet stated, citing Yardeni Research data.
Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.
Image: Reuters.