Cash strapped, and driving less
Three-quarters of Americans say rising gasoline prices have caused them financial hardship and to reconsider their driving habits, according to a new poll.
NEW YORK (CNNMoney.com) -- Americans are finally driving less - thanks to rising gas prices.
Seventy-two percent of respondents to a recent poll said recent price increases in gasoline have caused financial hardship for them or their households, according to a national CNN/Opinion Research Corp. poll released Wednesday.
"For some time we've been trying to determine the breaking point for when gas prices take their toll on the consumer," said John Kilduff, an energy analyst at the trading firm MF Global. "It appears we've found that point."
Americans driving less. Rising fuel prices have caused most Americans to cut back on their driving. Of the over 1,000 American adults surveyed in the poll conducted March 14-16, 64% said they have made some changes to their driving behavior as a result of higher gas prices, with 19% saying they have cut back on driving enough to have a major effect on their daily lives. And 5% say they have stopped driving altogether.
Gas sales have started to sink as Americans curtail their driving. A recent Commerce Department report showed sales at gasoline stations, which have been bolstered recently by record-high fuel prices, tumbled 1%.
"Consumers have been surprisingly resilient, but it's psychologically damaging to see prices above $3.50," said Kilduff.
Prices getting worse. The median price of gasoline hit a record $3.285 a gallon on Sunday and has only slipped about six-tenths of a cent since then, according to a fuel price survey conducted for the motorist group AAA. Drivers in California have to shell out more than $3.63 a gallon on average, and motorists in Alaska, Oregon, Washington, and Hawaii on average all had to pay more than $3.40 at the pump.
Consumers are paying 28.3% more for gas now than they were at this point last year, according to AAA.
And Americans expect the price of gas to keep climbing. Seventy-two percent said it was "very likely " for gasoline to hit $4 a gallon in 2008. One in five said it was "somewhat likely" to see $4 gas.
If gasoline hits an average $4.50 a gallon Americans say they will reduce the miles they drive significantly enough to affect their daily lives.
If gasoline hits an average of $8 a gallon, Americans said they would quit driving altogether.
Some experts say drivers should expect gas to reach an average of $4 a gallon before the price of gas finally comes down in the late spring as high prices crimp demand.
The price of gasoline usually increases this time of year, as refineries curtail output as they switch from winter to pricier summer blends. And as oil continues its record surge above $100, some think this years' gas spike will be more pronounced.
"High gas prices have increased the costs of transportation of all goods, which impacts everything," said senior Wachovia economist John Silvia. "Real, disposable consumer income is being hit hard."
Relief may be ahead. Some analysts expect gas prices to retreat.
Gasoline prices - though rising - have not actually matched crude oil's ascent, because gasoline inventories have reached near 15-year highs on sinking demand, according to Kilduff.
Gasoline demand has grown an average of 1% annually over the past six years, but this year's demand for gas is expected to increase only 0.3% from last year, down from last year's annual growth of 0.4%, according to the U.S. Energy Information Administration, a government agency that measures oil and gas supplies.
If vapid demand can successfully drive gasoline prices down, then perhaps drivers will see gas prices start falling significantly in the summer.
"That national average won't get to $4 a gallon," said Kilduff, who believes gas will peak around $3.50 on average in mid-April before coming down again. "We're in the process of getting the worst of this behind us."