By Michael E. Kanell c.2012 Cox Newspapers
ATLANTA (Cox Newspapers) — For the past few months, rising gas prices have been a headache. But it turns out we’ve been taking a painkiller — in the form of a mild winter — and the painkiller is gone.
The price of gasoline has steadily climbed since November, and each tankful has taken a bigger chunk from paychecks. Yet heating bills were far below normal. The result: a price spike that has not choked off the recovery, strangled the American consumer’s optimism or cratered finances.
Gas prices are still rising, and the pinch will get worse, said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University.
“As we come into a warm summer — even a normal summer — once the air conditioner comes on, there will be no relief for the pocketbook,” Dhawan said. “And if it’s a hot summer, we will feel it even more.”
More than two years after a vicious recession, unemployment is still high and recovery has been modest. While higher gas prices won’t kill the recovery, it sure won’t help, Dhawan said. “It will dent growth a little.”
It will be more damaging if prices soar because of a crisis with Iran, Dhawan said. “We will feel it more psychologically. And that will be bad news for corporate investment and job growth.”
Still, drivers know the basic drill. Gas prices usually hit their yearly low in midwinter, then start climbing, continuing to rise through late spring. They plateau through the summer, then slide after Labor Day and into the winter.
But that winter low is sure a lot higher than it used to be. So what does that mean for this summer’s high?
It probably means regular gasoline will rise to an average of about $4.20 a gallon during the next few months in metro Atlanta — 20 cents above last year’s crest, according to AAA, the national auto organization.
People are starting to pay attention, said AAA spokeswoman Jessica Brady.
“I think we are already seeing changes in behavior. People are consolidating errands, they are driving less and they are cutting back,” Brady said.
For instance, computer consultant Chandra Upadhyayula combines errands on weekends and shares driving during the week. The suburban Atlanta man found his 13-mile commute down Ga. 400 demoralizing, time-consuming and expensive — and that was before the most recent price hikes.
“You are traveling 13 miles, but it feels like you are traveling 60 miles because of the traffic,” Upadhyayula said. “I wanted to relax and I wanted to save some money.”
He placed his name on a Clean Air Campaign database for a carpool, found a partner and liked cutting his fuel cost in half, he said. “When I came to the United States in 1997, I was paying 55 or 60 cents a gallon.”
Compare that to this year’s low: about $3.08 at the start of the year. On Tuesday, Atlanta’s average for a gallon was $3.84, which was 6 cents below the national average, according to GasBuddy.com.
Why the rise?
• Some of it happens every spring: the switch of refineries over to “summer” gas. The blend causes less pollution as the air gets hotter. And it costs more to produce.
• Talk of military action against Iran has raised the odds that there will be trouble getting oil supplies out of the Persian Gulf. That specter has speculators pushing prices up.
• Supply is improving slowly, said Douglas Reynolds, resource economist at the University of Alaska. “Increases in U.S. production are not enough to keep up with declines in production elsewhere. It’s good for jobs here, but it’s not going to solve our problem at the pump.”
• Demand is relentlessly growing. Although U.S. drivers have been switching to higher-mileage vehicles and driving less, millions of new cars are being added to the roads in China and India.
“With each 10 percent increase in (a nation’s) income, there’s a 30 percent increase in number of cars,” Reynolds said.
Cheap gasoline was one reason that the economy surged in the 1990s, but gas now costs more than three times as much as it did then. Whenever gas prices spike, there’s talk about changes in consumer behavior. But prices are volatile and inevitably drop — even if they don’t fall back to where they had been.
Are people getting out of their cars?
During the past five years, MARTA data shows ridership rising and falling in a rough echo of gas prices. Ridership leaped most dramatically during 2008 when the economy was sliding into recession and the price of gas reached an all-time high of $4.11 a gallon, according to AAA.
Roughly 400,000 metro Atlanta commuters have found ways to avoid driving alone three times a week or more, said Tedra Cheatham, director of the Clean Air Campaign. That includes “telework” from home, carpools, vanpools and mass transit.
But lately, increases in MARTA ridership have not kept up with the hike in gas prices. And consumers have likewise been slow to adopt other alternatives to solo driving, said Cheatham.
Interest in carpools has been flat, she said, perhaps because consumers have become numbed to high prices.
“It used to be that there was an increase (in alternatives) when you got to that magic $4 figure. But this time, it will probably be an even higher number — maybe $4.15 or $4.25 before that happens. People are not panicked yet.”
Christy Duffner isn’t panicking. But she does a lot of driving, and the math isn’t good.
She lives in Midtown Atlanta, only about three miles from her office. But she travels several times a month to Florida to see her family, cruising along in her Mazda SUV. “It’s getting so it’s $150-$200 a trip. So I’m looking at a Prius. They say it gets 60 miles to the gallon.”
According to the Texas Transportation Institute, the average Atlanta household uses 1,050 gallons of gas -- roughly 87.5 gallons per month. Gasoline prices this past winter have been between 30 cents a gallon and 40 cents a gallon higher than a year earlier.
So that means an average household spent between $27 and $35 a month more than a year ago -- up to $210 extra for the past six months.
But heating bills were moving in the opposite direction. The number of “heating degree days” dropped by 37 percent in the past year, a measure of how warm it has been, said Dewey Neese, co-owner of Neese-Jones Heating and Air Inc. in Alpharetta, Ga.
So, on average, a resident of a 2,500-square-foot home with a 15-year-old heating system would have spent $400 less this past winter, Neese said.
It’s just that the reprieve on heating is over and air-conditioning season is about to get started.
That kind of spending competes with gasoline for consumer income, and the problem for both consumers and the economy is that it’s hard to cut gas costs by much, said Lisa Margonelli, director of the New America Foundation’s energy policy initiative and author of “Oil on the Brain.”
“The fact is, most people can’t really cut out their driving -- as everyone in Atlanta knows,” she said. “It’s really bad for all of us. It’s much worse for people making $40,000 and working two jobs.”
Individuals take an effective pay cut as they pay more in commute costs. The economy suffers an ever larger drag.
“In 2011, Americans spent $491 billion on gasoline -- about $100 billion more than in 2010,” Margonelli said. “And that sucked up the entire middle class tax cut. And it is getting in the way of the recovery.”
Michael E. Kanell writes for The Atlanta Journal-Constitution. Email: mkanell(at)ajc.com.
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