As gas prices rise, drivers step off the pedal

Bob Moon Apr 11, 2011
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As gas prices rise, drivers step off the pedal

Bob Moon Apr 11, 2011
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Kai Ryssdal: Most mentions of the traditional economic equation of supply and demand leave out the third element: Price. Supply and demand change; so too does how much something costs. You turn that equation just a little bit sideways, and you notice price often affects demand.

That’s exactly what’s happening at the gas pump. Gasoline sales have now fallen for five straight weeks. That’s according to a division of MasterCard that tracks spending at 140,000 gas stations across the country. Average prices for regular have now topped $3.50 a gallon in every state but Wyoming.

We went down the road toward $4 gas a couple of years ago. Cut back our driving sharply until it got cheaper. Our senior business correspondent Bob Moon suggests history may repeat itself.


Bob Moon: Just last week, President Obama heard an appeal at a town hall meeting in Pennsylvania: Can’t something be done to bring gas prices down? He told his questioner that, “to be honest,” there’s no quick fix. Then Mr. Obama sounded surprised to learn the man still drives what the president called a “big monster truck.”

Barack Obama: If you’re complaining about the price of gas and you’re only getting eight miles a gallon, you know — you may have a big family, but it’s probably not that big. How many you have — 10 kids, you say? Ten kids? Well, you definitely need a hybrid van then.

Rebecca Lindland: If it doesn’t hurt your wallet enough, you’re not going to change your behavior.

Rebecca Lindland is an analyst at IHS Automotive. Although Ford reports small car sales are up 6 percent in three months, the carmaker is seeing only a “very modest” rise in hybrid sales. And Lindland says that doesn’t necessarily bode well for a significant change in attitudes.

Lindland: Typically, consumers will change their buying behavior for three to four months, and then they will go back to the larger vehicles that they had been buying before any such gas crisis.

It could be deja vu all over: Turns out prices might actually be peaking, according to Tom Kloza of the Oil Price Information Service. He’s not expecting the cost of gasoline to go as high as some analysts have been predicting.

Tom Kloza: I would say it’s less than 50-50 that national prices get to $4. And I think there’s an awful good chance that what you pay on Easter Sunday will be higher than what you pay on July 4th and Labor Day. I believe that this year is front-end loaded, with the higher prices in the first five months of the year.

In other words, Americans who figure “this too shall pass” could get their wish — for now. But Kloza warns that we could well be faced with what he calls “apocalyptic” prices before we know it. Which leads us full-circle back to President Obama’s advice.

Obama: Like I said, if you’re getting 8 miles a gallon, you may want to think about a trade-in.

In Los Angeles, I’m Bob Moon for Marketplace.

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