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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