KATY, Texas – Most Americans would happily pay the $4.29 for a gallon of regular gasoline Buc-ee’s charged 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 a year ago, even Texans are complaining and changing their buying habits to do it.
“It makes me so stressed just thinking about buying gas,” said Nancy Oncken, a retired kindergarten teacher, as she filled up her station wagon on her way to visit five cousins at a water park outside San Antonio for a long weekend. “It’s always on the back of my mind now to be conservative about what I buy.”
When Mrs. Oncken drives by Buc-ee’s, the well-known Texas-scale grocery store with enough gas pumps to fuel an army, she often buys a souvenir bumper sticker, cup, or key chain decorated with the cartoonish bucktoothed beaver wearing a baseball cap. . But this year, she said, she will keep a grip on her wallet.
Drivers are getting a little rest this July 4 weekend as gasoline prices have fallen about 15 cents a gallon in the past two weeks. But now that Russia’s invasion of Ukraine has plunged into an exhausting war of attrition, limiting global energy supplies, gas prices are unlikely to fall much more this summer.
At $4.86 per gallon on Thursday, the national average price for regular gas was $1.67 higher than a year ago, according to the AAA Motorcycle Club. Fuel prices are changing buying patterns and there are early signs that people are rethinking their driving style.
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 said the holiday weekend might be the only vacation they would take this summer, a sharp break from the past.
A recent report from Mastercard SpendingPulse, which tracks national retail sales, showed that despite gasoline prices increasing about 60 percent from last year, total spending at convenience stores at gas stations rose just 29 percent, suggesting that many like Ms. Oncken compensate for gas prices by saving on small, erratic indulgences.
“Choosing a lower fuel level, driving less, or skipping that slushy or candy bar at the store are all part of a bigger picture of the choices consumers make every day in the face of higher prices,” said Michelle Meyer, chief economist at the United Nations. USA at the Mastercard Economic Institute.
The shock is particularly acute given that people became accustomed to low gasoline prices during the pandemic, when oil prices collapsed due to the decline in commuting and other economic activities.
Understanding inflation and how it affects you
It will take at least several months to resolve all the effects of higher prices on consumer behaviour. 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 who drive on vacation choose destinations closer to home to save on gas.
That could be one of the reasons for the modest decline in gasoline prices in recent weeks. Recent data from the Energy Department suggested that the amount of gasoline sold nationwide was down 2 percent or more from a year earlier. And Houston auto dealerships said customer interest in more fuel-efficient cars, as well as electric and hybrid vehicles, was growing, although parts shortages have limited supplies of new models.
Some transportation and energy experts say gas demand has declined, in part because more people are flying this year than driving on vacation than last year, although rising ticket prices and airport delays could reverse that trend as the summer progresses. In some cities, more people are returning to public transport due to concerns about the convenience of Covid.
Inflation and a slowdown in some parts of the economy could mean some companies are cutting back on shipping or shortening their supply chains to save fuel.
Giovanni Circella, a transportation expert at the University of California, Davis, said brief periods of high gas prices over the years had not fundamentally changed driving habits, as people still had to commute to work and do daily chores such as shopping and driving. . children to school and activities.
“But what will change is that if gas prices stay high for an extended period of time, Americans are going to change the type of car they drive,” he said.
A report released this week by RBC Capital Markets found that gasoline prices in the United States have risen more than 30 percent year over year for 39 separate months over the past 30 years. Of those months, demand fell just 12 times by 2 percent or more from the previous year. “Basically, long-term destruction of demand has historically been rare,” the RBC report concluded.
Frequently asked questions about inflation
What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar won’t go as far tomorrow as it did today. It is usually expressed as the annual price change for everyday goods and services such as food, furniture, clothing, transportation, and toys.
According to the same RBC report, a relatively small 3.5 percent of Americans’ total spending is currently spent on fuel. That is slightly below the average of 3.6 percent over the past 30 years.
“The real risk to oil demand and prices is when you start to see the economy slow down,” said Rice University energy economist Mark Finley.
Mr Finley added that, despite being a relatively small part of the family budget, high petrol prices had an excessive impact on consumer confidence. “There is a sense of crisis in people who say, ‘Something is wrong here and I need to be more careful,'” he said.
Energy experts say costs are increasing for lower-income families, especially those in rural areas, because they generally have older, less fuel-efficient cars and drive longer distances to work. Gas expenses can consume up to 10 percent of those families’ incomes.
How high the oil price will go depends on many factors, some of which are compensatory. Political turmoil in Libya and Ecuador is reducing global supplies, although President Biden may be able to convince Saudi Arabia to produce more oil on his upcoming trip to the Persian Gulf. Should China manage to bring its Covid epidemic under control, its demand for oil could grow and take stocks off the market, but that is not a certainty.
And the course of the war in Ukraine could determine how abundant Russia’s oil reserves will be in world markets.
If hurricanes in August and September damage refineries and pipelines on the Gulf Coast, fuel prices could soar.
US gasoline and diesel inventories were at their lowest seasonal level in more than a decade at the end of June, largely due to the closure or refurbishment of several refineries in the past two years.
That complicates matters for Brenda Davis, an insurance client in San Antonio, who recently refueled in Katy. When she drives through Buc-ee’s, she usually picks up a Mud Pie platter to add to her dinner table, but this year she said she’d resist.
“I’m trying to supplement my budget,” she said. “The prices are ridiculous.”
Lydia DePillis and Ben Casselman reporting contributed.