Americans appear to be cutting back fuel consumption as prices approach record levels.
With fuel prices nearing the politically significant $4 a gallon level, industry watchers report that gasoline consumption has begun to slow.
The question is whether motorists are simply reining in their time behind the wheel through careful route planning – or whether the decline signals the start of a new recession, as fuel consumption is often linked to spending in other areas of the economy.
Gas consumption has dropped by more than 1.2%, year-over-year, during the last four weeks, according to data tracked by MasterCard SpendingPulse.
The nation is using 13% less gasoline – about 1.2 million barrels a day – than it did in 2007, when consumption peaked.
Analysts say much of that was due to the recession, the jobless no longer needing to commute, but studies have shown that U.S. drivers are also taking steps to reduce driving by such things as route planning before running errands.
In mid-2008, when fuel prices hit a record $4.11, gasoline demand fell sharply – rebounding slightly when oil prices crashed later in the year.
The $4 mark is being taken with less panic this time, observers suggest. “Back then, the price at which demand fell off sharply was around $4. Today, the price may be $5,” Lars Perner, a consumer behavior specialist at the University of Southern California, told Reuters news service.
Tom Kloza, the publisher and chief analyst of the Oil Price Information Service, also anticipates further cuts in gasoline consumption should prices go higher. Some observers, including a former Shell CEO, have forecast the figures could ultimately top $5 a gallon in the U.S. But Kloza says he is “wondering” if prices might, instead, have peaked, with a downward correction coming.
President Obama certainly must hope so. He has been under heavy pressure to halt the run-up in fuel costs, which have seen the average national price of self-serve regular hit $3.98 a gallon – up 91 cents since January.
The president is expected to outline some of his plans on Friday, during a visit to Indianapolis.
What concerns many economist is whether the recent downward trend in gasoline usage is a signal of another impending recession. The latest, bleak federal jobs report only undermines such concerns.