Gas Prices Force Many to Rethink Driving, and Spending

“But what will change is if the gas prices stay high for an extended period of time, Americans will start changing the type of cars they drive,” he said.

A report released this week by RBC Capital Markets found that over the last 30 years, retail gasoline prices in the United States increased more than 30 percent year over year during 39 individual months. Of those months, demand fell 2 percent or more from the previous year only 12 times. “In short, protracted demand destruction events have historically been rare,” the RBC report concluded.

Currently, a relatively small 3.5 percent of total spending by Americans is devoted to fuel, according to the same RBC report. That is slightly below the 3.6 percent average over the last 30 years.

“The real risk to oil demand and prices is when you start to see the economy slowing down,” said Mark Finley, a Rice University energy economist.

Mr. Finley added that despite being a relatively small part of a family’s budget, high gasoline prices had an inordinate impact on consumer confidence. “There is a sense of crisis with people saying, ‘There is something wrong here, and I need to be more careful,’” he said.

Energy experts say costs multiply for lower-income families, especially those in rural areas, since they generally have older, less fuel-efficient cars and drive longer distances to work. Gas spending can consume up to 10 percent of those families’ incomes.

Article source: https://www.nytimes.com/2022/07/01/business/economy/gas-prices-driving-inflation.html