AAA: Gas pump

prices may

drop by spring
By Scott Nicholson
nicholson@wataugademocrat.com

One of the country’s leading transportation advocacy groups is predicting a decline in gasoline prices this year as a slowing economy and high pump prices keep more drivers off the road.

Geoff Sundstrom, public relations director and fuel price analyst for AAA, said oil inventories are growing while demand is declining or staying the same, which could cause pump prices to drop.

“It’s not out of the question for the price to fall as much as 50 cents a gallon (this spring),” he said. “But you have to remember, until recently $3 a gallon was a shocking price to most people, and gas prices were about $2.50 early last year.”

Gas prices in Boone as the weekend approached were ranging between $3.01 and $3.05 a gallon for unleaded regular, above the national average of $2.97. A month ago, the national average was $3.10 a gallon.

Sundstrom said while the lower fuel prices could be seen as good news for consumers, the bleakness of the entire economic landscape is part of the reason for the predicted drop.

“Coupled with the high price of fuel, declining home values and the stock market, people have significantly cut back on their discretionary driving, and businesses have probably cut back on their driving, too,” he said. “That could actually set the stage for lower prices.”

Willie Hicks of Triplett, who took advantage of a slight price dip to fuel up his Jeep Wagoneer on Friday, said the rising prices had affected his driving habits over the last six months.

He now carpools more often and limits his trips, and said he’d continue to remain conservative in his driving even if prices dropped. “I mainly just go to work and back,” Hicks said.

Ruth Bullock of Boone said gas prices had not only changed her driving habits, but her shopping as well. She began cutting back her driving about a month ago.

“I’ve not driven as many places as I’ve wanted to,” she said. “I’ve stopped going out of town and I try to do all my errands in one day now instead of through the week. I just stay at home more.”

Bullock said gas prices had affected the overall family spending, but she might start driving more if gas prices fall. “I have to really watch my budgeting,” she said. “It’s affected my groceries and I’m having to use wisdom to tighten up my budget.”

Sundstrom said it’s the first time in a decade, besides in the immediate wake of 9/11, that demand had dropped while supply was increasing. Usually, demand for gasoline increases two to three percent per year as more vehicles are in use and newly licensed drivers pull into traffic.

“Basically, back into December, we began to see the availability of gas increase each week while demand was flattening out,” Sundstrom said.

“It’s too simple to just look at the refining industry when it feels like there a lot of other economic indicators out there.”

The effects of rising gas prices have led to a decline in the sales of large trucks and sport-utility vehicles, but Sundstrom said not all the drop-off is due to changing fashion or costly fuel.

“A lot of large trucks are sold to the construction trade,” he said. “When buildings and homes aren’t started, the demand for business vehicles goes down.”

Steve Bussel, sales manager at University Nissan of Boone, said, “People are trading in trucks and bigger SUVs for mid-sized trucks and smaller, more fuel-efficient cars. Because of the area market, we still sell a lot of four-wheel-drives, but we’re selling a lot of small trucks and smaller SUVs.”

Bussel added that consumers are giving fuel efficiency a lot of thought in their buying decisions and said new models arriving this year were geared toward those concerns, including the Rogue and Murano.

Norman Cheek, owner of Toyota of Boone, said consumers had been shopping for smaller cars ever since gas began its climb to $3 last year.

“Gas mileage is the first thing they ask about when they’re looking to buy something,” Cheek said. “People are trading in their big gas guzzlers, but we have a hard time selling them.”

He said car sales are staying about the same despite the slow economy, and hybrid vehicles remain popular. He currently has two on the lot, though he said demand for those has also remained about the same.

AAA tracks national gasoline prices daily at www.fuelgaugereport.com.