Poll: Gas Prices Will Make '08 Economy Sputter

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Driving habits

How much will the projected fuel increases affect buying or driving habits?

"If the price goes up a dollar, people will only curb their driving habits by about 5 percent," says Neil Gamson, an energy fuel price expert for the EIA. "They'll drive 5 percent less on average, based on past experience. They might drive less or the next time they buy a car, maybe they'll look for a car with greater mileage."

He, too, notes differences in consumers' behavior. "They can't change their habits that much. For many people, those who are wealthy, they might not care. For many others, those who have to drive long distances, maybe they will."

"If prices creep up, people sort of get used to it, but if it's a sudden shock, then people really change their driving habits," Gamson says, recalling the gas shortages of the early 1970s when gas lines were common and stations often ran out of gas. "You thought that you might not be able to find gas."

Simon, the Ohio Wesleyan professor, agrees that incremental gas price changes are more palatable to consumers than large spikes. "It's the size of the jump, rather than the actual amount."

Relative price still low

Likewise, gas prices that rise with the cost of other goods and services will be less noticeable. "The rate of inflation in gasoline prices is substantially less than the rate of inflation for lots of other goods and services, she notes, citing the 20-year (1983 to 2003) increase in the price of gasoline (44 percent), compared to coffee (45 percent), beer (71 percent), postage stamps (91 percent) or tobacco (372 percent).

Simon says poll responses indicating American's willingness to cut back on gas consumption in 2008 may be overly optimistic. She doesn't believe that 59 percent of adults who buy gas have cut back on driving because of rising gas prices.

"It depends on whether or not you consider gasoline a necessity or a luxury," she says. "There is a distinction between people who need to use gasoline for commuting to work and those who don't. People may say they need it; but they may need it to get a gallon of milk or they may need it to get to work."

A.F. Alhajji, an energy economist, compares the price per gallon of gasoline to the unit cost of bottled water, beer or other beverages. When you do the math, gas is a bargain. Alhajji, an associate professor of economics at Ohio Northern University, says savings realized by switching to more fuel efficient vehicles -- compact and hybrid cars versus SUVS -- are not enough to convince many families of the need to downsize.

Not painful enough?

Sioshansi, the San Francisco energy consultant, says it's clear that people have become more aware of energy and global climate change. "It's very much on their minds. Maybe the prices have not risen enough to make it painful."

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He is not surprised by poll results showing reluctance to cut back on driving. "It seems like that is sort of a God-given right that they've had for so long that the recent price rises have not seemed to make a sufficient dent in most people's attitude."

High gas and oil prices are likely here to stay, Sioshansi says. Whereas oil and gas historically have been cheap, plentiful and secure, the future outlook points to "pricey, insecure and volatile" fuel supplies.

"Even though they'll see fluctuations in prices of energy, this is not a temporary aberration. They're not going to see $2-a-gallon gas come back. What they're seeing today is more or less permanent. This is not something that is going to go away."

Finding alternatives

That should prompt more people to look for viable alternatives in 2008. "Whether that means a smaller car, less commuting, bicycling, car pooling, telecommuting … people should gradually, before things begin to get worse, start to make those changes," Sioshansi says. "I tell people you don't need a Hummer to go to the corner store to buy a gallon of milk."

About the poll: GfK Roper Public Affairs & Media conducted interviews with 1,004 Americans over the age of 18 on Dec. 7-9, 2007. The survey participants were selected through random-digit dialing across cities in the continental United States. The poll's margin of error at a 95 percent confidence level is plus or minus 3 percent for the full sample.

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