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U.S. drivers won't cut back on gas
Even at $3 a gallon, Americans unlikely to seriously cut down on gasoline consumption.
September 2, 2005: 9:46 AM EDT
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NEW YORK (Reuters) - U.S. drivers may take baby steps to reduce the amount of gasoline they burn, but long commutes and inefficient vehicles mean consumers could be locked into high fuel demand despite rocketing prices, experts said.

Gasoline prices hit a record $2.68 a gallon on Thursday, according to travel club AAA. But experts said prices would have to go far higher to substantially cut demand.

"It takes just enormous price increases of gasoline to launch demand destruction," said Phil Verleger, an independent oil consultant.

Even though prices have spiked as high as $5 a gallon in some locations, Verleger said, costs over the entire United States would probably have to average between $5 to $10 a gallon to trim gasoline demand by even 5 percent.

Consumers can carpool, fill tires to capacity and trim vacation driving, but the impact on demand will probably not exceed a few percentage points until drivers switch to more efficient vehicles.

Average U.S. fuel economy for cars and light trucks has fallen steadily from a peak in 1987 of 22.1 miles per gallon to 20.8 mpg last year.

"They (drivers) are not going to substantially reduce gasoline consumption," John Lichtblau, chairman of consultants PIRA Energy Group in New York, said about steps consumers take to reduce consumption that fall short of buying more efficient automobiles.

"At the margin they can reduce it somewhat, maybe in the 5 percent region. But it's going to have a very modest impact on consumption in the short term, probably the next two or three months," he said.

By that time, damage to oil refineries, pipes, and platforms along the U.S. Gulf of Mexico caused by Hurricane Katrina could be fixed, he said.

Commutes to work have gotten longer since the gasoline price spikes caused by the Arab oil embargo in 1973-74.

"They've locked themselves into vehicles that are gasoline hogs, and many consumers have moved into exurbia and have long commutes," Verleger said of residential areas increasingly popular in the U.S. Midwest that are outside of a city and beyond a suburb.

National Association of Convenience Stores spokesman Jeff Lenard said that since the 1970s people are less likely to have conventional 9 to 5 jobs, which also cuts down on car-pooling.

"In the short run, people's consumption is essentially fixed for gasoline," said Jason Schenker, analyst at Wachovia Securities. "The biggest evidence of this is despite the fact we've got prices at $3, $4 or $5 a gallon, we've got consumers lining up to pay for it."

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