Lower Gas Prices Don’t Make Americans Feel Rich
Drivers are breathing a sigh of relief as gasoline prices plunge across the country. Gas below $1.50 a gallon has appeared in a few places in recent days, and the national average has dropped almost in half since July, to $2.18 a gallon.
But even as worry about gas prices fades, it is being replaced by fear about the broader economy. Each 10-cent drop in gasoline prices puts $12 billion a year back in consumers’ pockets. Instead of spending that cash, people are trying to save it or cut their debt, many said in interviews.
“All that money is going right into paying off my credit cards,” said Jose Martinez, 33, as he pumped gas into his Dodge Charger at Ohio Gas Station No. 1 in Cleveland.
Moreover, the fall in gasoline prices is not translating into improved fortunes for automakers, at least not yet. Consumers said they remained wary of gas-guzzling cars on the theory that prices would rise again.
“I don’t think anyone who’s been paying attention for the last eight years would think that now is the time to go out and buy a Hummer,” said Geoff Sundstrom, spokesman for AAA, the automobile club.
When gasoline topped $4 a gallon this summer, Celeste Vazquez of Cleveland started working 10 hours of overtime every week to make ends meet. But lately, with prices falling below $2 a gallon at many stations here, she has been able to cut her hours.
“I finally get to spend time with my kids, which is wonderful,” said Ms. Vazquez, 34, as she paid $1.93 a gallon to fill her Chrysler PT Cruiser. “I doubt it will last, though. I’m not about to go buy a new wardrobe or anything.”
Lower gas prices meant that Art and Lisa Ritchie, who are farmers, could afford to spend $12 on breakfast last week at the Lighthouse Cafe in Lodi, Ohio. But they have no plans to spend tens of thousands of dollars to furnish and landscape their new house.
“I’d love to do those big projects,” said Mr. Ritchie, 49, who farms 16 acres of cherries, peaches, nectarines and figs in northwest Ohio. “But I just know that gas prices will go right back up.”
Lower gasoline prices have followed a rapid drop in the price of oil, to less than $59 a barrel on Thursday, from more than $145 a barrel in July. The pace of the recent drop in fuel prices is “absolutely unprecedented,” said Tom Kloza, publisher and chief analyst for the Oil Price Information Service.
“People are just excited about it,” said Dennelle Fisher, director at the Maverik store in Wheatland, Wyo., which was selling gas for $1.45 a gallon on Thursday, and even giving a 2-cent break on that price to people with the store’s loyalty cards. “They come in and they ask how long are we going to keep it down,” Ms. Fisher said.
Many experts say they believe that gasoline prices are close to bottoming out and that the national average will hover around $2 a gallon through the holidays before creeping up in the new year.
In the terrible economic climate, the gas price cut was not enough to bolster consumer spending in October, according to MasterCard SpendingPulse, a report based on MasterCard purchases and estimates of cash, check and other credit card sales.
“It would be very surprising if things recovered based solely on gasoline prices,” said Michael McNamara, vice president of research and analysis of MasterCard Advisors, which produces SpendingPulse.
Dan Stone certainly has not started spending again. Mr. Stone, of Cleveland, stopped driving his 1996 Dodge Ram pickup on vacations to Arizona and Florida when gas prices rose this year. He also quit buying tickets to Cleveland Indians and Cavaliers games. Now that prices have dropped, the only change he has made is to resume driving his 12-year-old daughter to basketball practice himself instead of arranging car pools.
“I still eat all my meals at home,” said Mr. Stone, 59, as he filled his pickup’s tank recently. “And I haven’t started going back to sports games because I’m pretty sure the gas prices will go right back up.”
Sitting around the communal table at the Lighthouse Cafe in Lodi, three couples enjoyed breakfast last week before leaving for a group camping trip in the Hocking Hills of Ohio, 150 miles away. One of the campers, Bob Leonard, replaced his Chevrolet S-10 pickup four months ago with a Toyota Prius. His brother, Bill Leonard, 65, swapped his Ford Ranger pickup for a compact Toyota Yaris last year.
“I don’t see gas prices staying this low,” said Bob Leonard, 63, a nutrition adviser from Medina, Ohio. “I’m glad I bought the Prius when I did.”
Their friend Bob Keller, 62, had parked his Toyota Highlander S.U.V. and started riding the bus to work in downtown Cleveland. With lower gas prices, riding the bus costs as much as he would spend on gas and parking, but he has not considered switching back.
“I get to nap on the bus,” said Mr. Keller, who works for Cuyahoga County Employment and Family Services. “Besides, why start driving again when the gas prices will only go right back up?”
Across the country, high prices seem to have produced lasting changes in public habits. As prices rose, many people parked their cars and took the bus or train, and that change is evidently sticking even as gas falls. At 22 transit systems surveyed last week by the American Public Transportation Association, ridership either stayed the same or increased over the last two months, said Virginia Miller, spokeswoman for the group.
Likewise, MasterCard Advisors reports show that national gasoline demand remains down compared to previous years — though by only 3 to 4 percent a week, compared with the 8 or 9 percent drops of earlier this year.
When prices topped $4 a gallon over the summer, Jim Booth of Cleveland could not afford gas for his 1992 Dodge Caravan to visit his 2-year-old son, who lived just eight miles away.
Last month, those visits started again. “So that’s wonderful,” said Mr. Booth, 51. “But it’s not like I can afford to buy a new car or anything.”
Not everyone is cutting back. Alexander Kudryk paid $2,000 last week for a 1988 Cadillac Brougham with flashy 22-inch rims so he could cruise the streets of Cleveland in style.
“I love it,” said Mr. Kudryk, 20. “But if gas prices go back up, I’ll have to sell it.”