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Pain from increased gas prices is mostly mental

Jennifer Collins May 4, 2011
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Pain from increased gas prices is mostly mental

Jennifer Collins May 4, 2011
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Steve Chiotakis: This week, we could see average gas prices across the country top $4.00 a gallon. A full dollar more than just six months ago. Sure sounds like a big deal. And to most people it is. But how much do those incremental increases really cost you?

Marketplace’s Jennifer Collins took a ride to find out.


Jennifer Collins: If you’re upset about gas prices in your part of the country, welcome to Los Angeles.

Collins: OK. I just filled up my gas tank. It’s $4.29 a gallon. My total comes to $44.25.

Ugh!

John Gourville is a marketing professor at Harvard Business School.

John Gourville: You know, the idea of spending $40, $50, $60 at the pump seems outrageous.

But let’s do the numbers: The average driver fills up about once a week. So every time the price of a gallon of gas goes up a dollar, it costs an extra $10 to $15 to fill the tank.

Gourville: So I think the actual increase is less than people’s response to that increase. And I think it’s because with gas prices, it’s right in your face.

He says the huge signs at the gas stations keep us thinking about gas all the time — well, most of us anyway. Michelle Saint-Germain is a professor at Cal State Long Beach. She’s been driving 300 to 400 miles a week for 16 years. She stopped looking at gas prices years ago.

Michelle Saint-Germain: I’m gonna buy it anyway. I mean, I suppose if I drove up and it said $50 a gallon, I might be really outraged but it just goes up a little bit, little bit, little bit and I just don’t even notice it.

Saint-Germain’s secretary Kathy Allan put the price of gas in practical terms.

Kathy Allan: I guess it’s you know, two days of lunch.

But has she started brown-bagging it?

Allan: No. Sorry.

Professor Soren Anderson at Michigan State University has an explanation for that.

Soren Anderson: If the reason the price is getting high is because people are doing better and wanting to buy more oil.

In other words, the economy is improving…

Anderson: Then, they might not feel like they’re worse off.

But for people who aren’t feeling the recovery, the increase can sting. And some do cut back their driving — creating what may be the very few benefits of higher gas prices.

Saint-Germain: Right. It’s a lot easier to find a parking space.

That’s Saint-Germain as she pulls into a front-row spot.

I’m Jennifer Collins for Marketplace.

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