Oil prices haven't changed American travel habits, yet

An oil well sits in the middle of a corn field near New Haven, Ill. Higher levels of ethanol for gasoline are to be allowed in newer cars.

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JEREMY HOBSON: Now let's get to our top story. Oil prices fell slightly in overseas trading today. They're around $105 a barrel. That's in part because of news that OPEC could decide to boost supply because of the disruptions to oil production in Libya. Still, gas prices here in the U.S. are above $3.50 a gallon on average nationwide.

Let's bring in Juli Niemann, analyst at Smith Moore and Company, who joins us every Tuesday. Good morning.

JULI NIEMANN: Good morning Jeremy.

HOBSON: So it seems like even with gas prices at $3.50 a gallon or higher people aren't really changing their habits just yet. How high do prices have to go before Americans really start changing their driving habits?

NIEMANN: Well there's a big difference this time between real oil and turmoil. And right now you're looking at consumers basically kvetching, but not changing anything. They're coming off of a deep recession. They've got some more money to spend, access to disposable, personal income so they're complaining, but they're not changing yet. They're just starting to hit the open roads and starting to hit the open skies. This year they're going to go off on vacations instead of stay-cations. That's where you're going to start to see the prices really climb. Then we're going to see how much pain they can take. I think the pain will come at about $4 a gallon.

HOBSON: OK, so maybe this summer we'll start to see people change their habits. Obviously, higher fuel prices will affect our driving and flying, but are there other things that are affected by higher prices of fuel?

NIEMANN: Well the problems looming are for food and farmers. Spring planting is coming up here. Fuel is a key component of it. Transportation, delivery, packaging, that's going to be a key factor and it goes through to the food chain as well. So that's going to be a potential problem.

HOBSON: All right. Juli Niemann, analyst at Smith Moore and Company, thanks so much.

NIEMANN: You bet.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.

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