Gas Pains: Impact of high gasoline prices

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In its April Short Term Energy Outlook, the U.S. Department of Energy (D.O.E.) notes that high demand for oil worldwide is keeping crude oil prices high and increasing the competition for gasoline imports. That’s been enough to drive up prices at the pump in most countries, including the United States.

Other factors are exacerbating the pressure at the pump in the United States. Key among them is additional changes in gasoline specifications because of environmental regulations.

According to ConocoPhillips, U.S. refiners must provide 18 new gasoline formulations to replace the additive methyl tertiary butyl ether, or MTBE, which has been banned in several states where there is heavy gasoline consumption. Other factors include low inventory levels and a lack of spare production capacity at refineries, which, in turn, increases operating costs and limits flexibility in supply.

D.O.E.’s Outlook further notes that demand for gasoline will be higher this summer than last year, not because drivers are using more gasoline, but because the number of drivers, vehicles and miles each vehicle travels is increasing. It predicts gasoline prices at record levels through the summer, making this the second consecutive summer with record high gasoline prices.

Consumer watchers say the skyrocketing gasoline prices are influencing the behavior and spending habits of consumers. Businesses that rely on vehicle transportation no doubt have already seen an increase in their monthly costs. But the changes in consumer behavior and spending habits can affect other types of businesses, such as those in the entertainment, restaurant and hospitality sectors, the experts say. The following statistics from various reports reflect trends in demand as well as in consumer attitudes and behavior stemming from rising gasoline costs.

• Percent of consumers who said they purchased less gasoline than usual as a result of record high gas prices, according to the survey, “Pain at the Pump—Consumers Reaction to Record High Gasoline Prices,” by the NPD Group in Port Washington, N.Y.: 28.
• Percent who said they would consider modifying their vacation plans this year if prices remain at record levels: 39+.
• Percent who said they tried carpooling, telecommuting or taking public transportation in response to high gasoline prices: 19.
• Percent who said they would buy a more fuel-efficient vehicle in the next year: 14.
• Among S.U.V. owners, percent who said a more efficient vehicle was in their future: 18.
• Percent who said they modified their vacation plans: 23.
• Average number of gallons of gasoline consumers are buying per month, according to NPD, using Motor Fuels Index: 60.
• Approximate average increase in monthly gasoline spending per driver: $35.
• Percent increase in total U.S. gasoline demand in 2004 over 2003: 1.4.
• Average number of barrels of oil the Department of Energy projects for summer motor gasoline demand:  9.3 million.
• Percent increase over last summer’s demand despite the higher prices: 1.8.
• Amount by which economists say spending will decline in other areas for every penny per gallon that gasoline prices rise: $1 billion.
• Amount of money Wal-Mart estimates that the higher gasoline prices take away from an average family budget per week: $7.
•  Amount consumers in New York State are expected to spend on gasoline in 2005, according to a report by Democrats in Congress: $6.1 billion.