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Driven to What?

Kyle McIntosh

IN THE FIRST WEEK of March, prices for regular unleaded gas sprinted past $5 per gallon in Ventura County, California. Last week, a station I pass on my way to work increased its price three times in 36 hours. Before work on Thursday, March 3, the price was $4.89 per gallon. By the end of that same day, the price was up to $5.09. When I left work on Friday, March 4, the price had been jacked up again, this time to $5.29.

As I write this post on Wednesday, March 9, the price has ticked up to $5.69 per gallon. That’s an increase of 80 cents, or 16%, in less than a week.

The last time I saw prices over $5 was July 2008. While I don’t remember adjusting my habits when prices hit $4 or $4.50 in 2008, there was something about the $5 threshold that led me and many others to change our daily routine. With 2022 prices looking like they’ll be over $5 per gallon for an extended period, I’m curious to see when and how consumers will change their behavior this time around. Here’s what I’ll be watching for:

Wading into the carpool. In 2008, I commuted 50 miles roundtrip. While I lived close to a handful of my coworkers, we all preferred to drive solo most days. But when prices touched $5 per gallon, a group of us started to carpool a few days per week. With continued COVID worries and many people working remotely, carpooling options may be limited in 2022. But if prices continue to rise, I suspect many will start sharing commute time with others.

Pricing SUVs. In 2008, demand for gas-guzzling sports utility vehicles dropped dramatically in our area. I had two friends who sold Ford Expeditions around this time. Both struggled to sell these behemoths. One had such a hard time selling his SUV that he seriously considered giving it away. Ultimately, both sold them for a few thousand dollars, which was extremely low relative to both their Kelley Blue Book value and what they’d paid a few years earlier. With annual vehicle price inflation still running at about 30%, it’s hard to imagine there will be a major drop in SUV prices. But if we’re soon looking at $6 or $7 per gallon gas, consumers may be less keen to upsize their vehicles.

Minding the gap. For my wife and me, the cost of filling our tanks will be about $150 per month more than in December 2021. With others facing similar—and, in some cases, higher—cost increases, it will be interesting to see how consumers reduce spending in other areas to offset this higher fuel cost. It seems likely that many will cut back on eating out, as well as limiting trips to Starbucks. I can also see consumers cutting a streaming service or two to help close their monthly budget gap.

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Nick Politakis
Nick Politakis
8 months ago

We live in Greece part of the year. Gas is now $10 a gallon. It was $8.50 last summer. It doesn’t seem to increase as much as it has in the US because 75% of the price is taxes.

MikeinLACA
MikeinLACA
8 months ago

My wife and I just returned from a vacation in Panama. They use the USD, and don’t impose high taxes on fuel. Gas was about $1 per liter, or $3.70 per gallon. Stunned to see prices twice that in Los Angeles. So I’m driving my hybrid Kia veerrrrrry carefully.

Mark Schwartz
Mark Schwartz
8 months ago

Buying gasoline at these higher prices is only the tip of the iceberg. Fossil fuels touch everything in our lives one way or another. Fossil fuel costs drive just about every other cost of product in just about every industry. Recently read the fertilizer in Montana doubled per acre from $200 to $400. How does that impact me in Georgia? Well, not just me but it impacts every single person in the U.S. who buys groceries, eats out at restaurants or purchases anything. This BTW was the case 2 months age, pre Ukraine invasion, since then it’s gotten much worse. I wish gas was the only thing on the increase but like I said it’s only the tip of the iceberg. Hang on to your hats and your wallets. Oh, one last thing I read today is Janet Yellen said that the 2nd Q economy should have a soft landing with regards to inflation. With all due respect to her position, my pet rock has better sense than that.

David Powell
David Powell
8 months ago

Have barely bought gas in the last 10 years. Driving EVs your “pump” is in the garage and your fuel is American electricity. Better still: fuel cost per mile is about 3x lower than gas. And they’re a hoot to drive

Chazooo
Chazooo
8 months ago
Reply to  David Powell

So far you are not paying “your fair share” of road taxes, but be patient…

David Powell
David Powell
8 months ago
Reply to  Chazooo

Where I live, we pay an EV-specific fee at annual registration renewal which covers our share of road costs normally covered through gas taxes. When it comes to taxes, there’s rarely a free lunch, right?

Ormode
Ormode
8 months ago

I am filling up four times a month at $40 a pop. Paying $50 isn’t really going to impact me much. As a retiree, my overall basic living expenses are under $3000 a month, but I usually spend about $4000 on an annualized basis.

Mik Cajon
Mik Cajon
8 months ago

A year ago America was exporting our oil/gas surplus, inflation was nonexistent, Russia wasn’t at war, legal immigration was enforced and the stock market reached new highs…now it’s all being reversed by the usual suspects…god help us.

Last edited 8 months ago by Mik Cajon
Chazooo
Chazooo
8 months ago
Reply to  Mik Cajon

Why the down vote of Mik’s comment? Are you downvoters ignoring the actual true facts he stated – of course you are, despite strong evidence to the contrary.

Jonathan Clements
Admin
Jonathan Clements
8 months ago
Reply to  Chazooo

I suspect the down votes reflect the fact that readers view this as a site to read and learn about personal finance, not a place for political commentary. I see the same sort of down votes on “left wing” comments.

Jim Burrows
Jim Burrows
8 months ago

While gasoline isn’t a big part of most household budgets, making up less than 3% of total spending, the psychology of gas prices is always a bit weird. Ben Carlson wrote an interesting piece on this recently.
Why Gas Prices Matter So Much (awealthofcommonsense.com)

Last edited 8 months ago by Jim Burrows
Chazooo
Chazooo
8 months ago
Reply to  Jim Burrows

See the comment by Mr. Schwartz above.

R Quinn
R Quinn
8 months ago

In the UK it’s $9.81 USD and rising

Kyle Mcintosh
Kyle Mcintosh
8 months ago
Reply to  R Quinn

We lived in the UK back in 2012 to 2014. Gas was about $10 then as well though heavily influenced by the stronger GBP then. Folks simply tended to stay close to home. As Americans, we had no issue venturing 3 hours away from home for a day trip. My colleagues thought we were crazy.

Piper
Piper
8 months ago
Reply to  R Quinn

Glad to see you back. Hope all went well with the plumbing job.

IAD
IAD
8 months ago

Our gas prices are not as high as yours…..yet. We have already started to make changes. Eating out less, canceled one of our planned vacations. The concerning part is the ripple effects plans like our will have on our local economy. Restaurants that are barely on their feet will take another hit. In years past gas prices would drive many to mass transit where now many will double down on remote work or telework.

The parallels between the Biden and Carter administration are eerily similar!

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