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Pain at the gas pump subsides

10:14 AM EDT on Thursday, August 7, 2008

By Timothy C. Barmann and Paul Edward Parker

Journal Staff Writers

Rebecca Ebeling, of Providence, fills her Volkswagen Golf in Warwick. The average price for a gallon of gas in the state is $3.869.


The Providence Journal / Kris Craig

When gasoline prices approached $4 a gallon this spring, something unusual happened: people starting driving less.

For years, Americans’ thirst for gasoline seemed unaffected by price, and consumption continued to rise along with the steady price increases.

That changed this year when the price of gasoline set record highs week after week. Government figures show that consumption is down significantly from last year, the first decline in demand since 1991. And a report released last week said that the number of vehicle miles traveled fell by 3.7 percent in May, compared with the same month last year. The decline was even more dramatic in Rhode Island. Motorists here drove 5.4 percent fewer miles in May.

“I ride a bike around a lot more,” Jonpaul Guinn, of Providence, said yesterday as he filled up at a gas station near his work in Warwick. “It definitely changed my plans for the summer.” He put the brakes on drives to Baltimore and Cooperstown, N.Y., going to Cape Cod and Boston instead. “I think more before I take a road trip now.”

The price of gasoline has receded from its all-time high of $4.119 a gallon, set on June 16. On Monday, the state’s Office of Energy Resources reported that the average price of regular self-serve gasoline had dropped to $3.869 a gallon, a decline of 25 cents over the past three weeks. The price is now at the same level it was in mid-May.

With that reprieve, will drivers revert to their old gas-guzzling ways? Is the 25-cent drop enough to turn back the dramatic move toward energy conservation?

Several experts said that’s not likely.

“I don’t see this reversion back to the way it was before the significant price increases,” said Lloyd Albert, senior vice president of public and government affairs for AAA Southern New England.

Journal grapic / George Sylvia

“People are really thinking differently about how they’re spending their energy dollars now,” he said. “There’s really a sea change in the way they’re thinking.”

People are looking at their gasoline purchases in the context of other expenses that have risen, such as the cost of heating oil and food, he said.

But drivers gassing up in Warwick yesterday aren’t so sure.

“Are people’s habits going to change so [prices] stay $3.85?” wondered Rebecca Ebeling, of Providence. She already is anticipating the need to resist the urge to burn more gasoline. “I don’t want to start driving more because gas prices are less when I should drive less because it impacts the environment.”

Guinn shared Ebeling’s environmental take, but said the trips to Baltimore and Cooperstown might be back on the table. “I can afford it now.”

Not that he’s celebrating gasoline prices in the mid-$3.80s. “They usually come down in summer anyway, but they’re not coming down as low as they did last year,” he said. “I have a Mini Cooper and $49 to fill it up? That doesn’t feel low at all. It’s not cheap. It’s not.”

James Williams, an economist with Arkansas-based WTRG Economics, said he thinks the price drop may reverse the conservation trend somewhat.

“Certainly people will drive a little more if prices get lower, especially if they drop another 30 or 40 cents,” he said.

But Williams also sees a more lasting change in consumer behavior.

“That $4 [a gallon] was a psychological blow, and I think it has some sticking power. I think folks are still thinking about buying smaller cars; the mindset is now there.”

That trend has had a big impact on Detroit, where automakers have practically abandoned the big, gas-guzzling vehicles that were so popular during the era of cheap gas. “No one’s selling them,” he said.

Another factor that would tend to support reduced energy consumption is the slow economy, he said.

Another analyst, Tom Kloza, said he doesn’t see gasoline consumption rising this year.

“I would be surprised if we see any of the remaining 20-plus weeks show gasoline demand higher than the same week in 2007,” Kloza said on his energy blog, Speaking of Oil. “Costs of $1.5 billion or so have a way of getting one’s attention.”

The $1.5 billion to which Kloza referred is his calculation of how much U.S. consumers spent each day for gasoline, at $4 a gallon. By comparison, he said the daily expense was $1.14 billion at the end of July 2007, and $540 million in late July 2003.

Kloza suggested that the drop in the price of gasoline may be part of a historical pattern in which there is a “reality check” in the summer months that follows a traditional price run-up in the spring.

“The bad news: there is often a second high tide that commences in late summer and runs through early October,” Kloza wrote.

“The oil crisis is not over. It is merely on a summer hiatus.”

tbarmann@projo.com