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Americans start to cut back on driving as prices rise

NEW YORK — With the price of gas above $3.50 a gallon in all but one state, there are signs that Americans are cutting back on driving, reversing a steady increase in demand for fuel as the economy improves.

Gas sales have fallen for five straight weeks, the first time that has happened since November, according to MasterCard SpendingPulse, which tracks spending at 140,000 service stations nationwide.

Before the decline, demand had been increasing for two months. Some analysts had expected the trend to continue because the economic recovery is picking up, adding 216,000 jobs in March.

"More people are going to work," said John Gamel, director of gasoline research for MasterCard. "That means more people are driving, and they should be buying more gas."

Instead, about 70 percent of the nation's major gas station chains say sales have fallen, according to a March survey by the Oil Price Information Service. More than half have reported a drop of 3 percent or more — the sharpest since the summer of 2008, when gas soared past $4 a gallon.

This year, gas prices shot up as unrest in North Africa and the Middle East rattled energy markets, and increased global demand for crude oil squeezed supplies. Gas is already 41 cents more expensive than it was at this point in 2008, when it peaked at $4.11 in July. Only Wyoming has an average price lower than $3.50 a gallon for regular unleaded gas.

Most analysts are sticking to forecasts of a high of $4 a gallon, though some have predicted $5 a gallon.

Some drivers are already hunting for cheaper gas, sometimes with the help of a mobile phone app. Others are checking out bus and train schedules, reconsidering mass transportation or trading in their sport utility vehicles for more fuel-efficient models.

The decline is somewhat puzzling because Americans typically curb their driving only as a last resort, after sacrificing other forms of discretionary spending, such as shopping for clothes or going to movies.

But demand for gas is falling while other types of spending are on the rise. Retail sales rose 2 percent in March, compared with a year earlier, surprising economists.

Gamel said it's too early to tell whether this is the kind of long-term decline in demand that the economy endured during the recession. Prices already are in the range they were in when Americans started to leave their cars in the driveway several years ago.

Even if demand for gas keeps falling in the United States, that probably won't be enough to force the price down. That's because worldwide demand for crude oil keeps rising.

By the numbers

55% Amount Hyundai Sonata

and Elantra sales soared in March.

24% Amount Chevy Suburban

SUV sales fell.

2.7B Gallons of gasoline bought last week, says a MasterCard report.

3.6% Decline, in gallons, of gas sales

from same period in 2010,

when it was 80 cents cheaper.

87M Daily global demand for barrels

of oil, about equal to the 2007 peak.

88M Expected daily demand by year's

end, mostly due to China.

Americans start to cut back on driving as prices rise 04/14/11 [Last modified: Thursday, April 14, 2011 9:33pm]
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