While traveling on a minivacation with my family while the US price of gasoline was peaking recently, that price spike didn't appear to have slowed down summer vacationers, truck transportation, or commuters.
The turnpikes of Oklahoma were buzzing with RVs, motor homes, and cars destined for their family vacation spot. Our vacation took us to one of Oklahoma's lake resorts. Personal watercraft and boats were all around, and from small fishing boats to large houseboats, people were enjoying themselves. Campers, RVs, and motor homes lined the shoreline. I can't imagine what it must cost to fill the tanks of each of these big vehicles, but it didn't seem to put a damper on these vacationers.
Gasoline consumption stable
Industry experts have said that US gasoline consumption during the peak summer driving season will remain stable despite the earlier price spikes.
US motor gasoline consumption for the first half of 2000 averaged 8,438,000 b/d vs. 7,053,000 b/d for the same period in 1999, an increase of 19.6%. The current year shows a steady rise in consumption each month, with a slight decline in June. However, consumption compared to June 1999 is 3.5% greater. Data through July 21 shows consumption relatively unchanged at 8.6 million b/d. This evidence shows that the roads and highways are still the cheapest and best mode of transportation to get where you need to go.
A review of nationwide prices shows that consumers may have paid at the pump 35-45¢/gal more than a year ago. The Midwest region, PADD II, felt the biggest impact, averaging 40-65¢/gal more. That can be quite a shock to consumers on a budget. The average regular pump price for the first half of 2000 was 146.72¢/gal compared with 106.8¢/gal the same time last year, a 37.4% jump. PADD II experienced prices for first half 2000 at 146.4¢/gal vs. 101.8¢/gal for first half 1999, a 43.8% increase.
Prices still dropping
In OGJ's weekly gasoline survey for July 26 (see Statistics, p. 73), prices continued to decline. This weekly survey is conducted by averaging a random sample of gas stations for 42 metropolitan areas.
For the latest week's data, the average pump price was 152.7¢/gal compared with 120.7¢/gal a year ago. PADD II is driving the US average down by slowly dropping their prices. For this latest week, PADD II averaged 143.4¢/gal vs. 117.0¢/gal for same week a year ago. Even though nationwide prices are coming down, there was a slight increase in West Coast numbers. They were up for the latest week at 167.7¢/gal vs. 163.3¢/gal for July 19.
Representatives of the industry have speculated factors contributing to the high gasoline prices include low inventories of gasoline, high crude prices, the introduction of Phase II reformulated gasoline in the Midwest region, pipeline breaks, distribution problems, and refinery outages. The price spike in the Midwest has even spawned a federal investigation (see related story, p. 20).
Other factors include low crude supplies entering the markets due to Organization of Petroleum Exporting Countries production cutbacks in 1999 as well as higher demand in the international markets. Other past experiences of rapid gasoline hikes were the Arab oil embargo in 1973, the Iranian revolution in 1978, the Iran-Iraq war in 1980, and the Persian Gulf conflict in 1990.
Changing habits
Before you see US consumers making behavioral changes in their driving habits, the nation will have to experience conflicts that will be more of a long-term problem such as those mentioned above. And we hope that will not be the case.
The latest price movements confirm the need for consumers to be sure not to overreact to the recent price hike of gasoline and remember that the market will always correct itself, given no other major problems happening like they did this summer. We are already experiencing the downturn of prices overall.
However, consumers in the Northeast will probably get hit with high heating oil prices this winter. Refineries are barely keeping up with the demand of gasoline and won't be able to stockpile heating oil as usual. So stay tuned this winter to hear (and read) about the heating oil debate. I'm sure the government will spend money trying to decipher what went wrong.
But, in the meantime, everyone have a safe and wonderful driving season.
