U.S. Gas Consumption Drops - First Time In 16 Years

<p>Economic recession and soaring gas prices have resulted in the largest, demand-induced, sustained decline in gas consumption in 16 years. Motorists are reacting to the higher prices and weaker economy in their vehicle selection and driving behavior.</p>
March 6, 2008, 1pm PST | Irvin Dawid
Share Tweet LinkedIn Email Comments

"There is evidence that Americans are changing their driving habits and lifestyles in ways that could lead to a long-term slowdown in their gasoline consumption."

"In the past six weeks, the nation's gasoline consumption has fallen by an average 1.1% from year-earlier levels, according to weekly government data."

As demand declines, supplies are increasing - "gasoline inventories have been on the rise for the past four months, reaching their highest levels since February 1994."

Yet, "in a sign of the growing disconnect between demand and the market", prices are rising along with supply.

"Investors piling money into commodities as a refuge from inflation have helped push oil prices close to their inflation-adjusted record of $103.76 a barrel, set in 1980."

"Today, a weakening economy is intensifying the effects of high gasoline prices, at the same time Americans are being pinched by broader inflation.

The U.S. Energy Information Agency estimates that a 1% reduction in personal income cuts gasoline demand by 0.5% as consumers, along with truckers who deliver goods, cut back on driving, says Laurie Falter, an oil-industry economist at the agency."

"The combination of forces is prompting Americans to cut back on driving, sometimes taking public transportation instead. It's also setting the stage for what may be a long-term slowdown in gasoline demand by forcing Americans to become more fuel-efficient faster.

As consumers make major spending decisions, such as where to live and what kind of vehicle to drive, they are beginning to factor in the cost of fuel. Some are choosing smaller cars or hybrids, or are moving closer to their jobs to cut down on driving. Those changes effectively lock in lower gasoline consumption rates for the future, regardless of the state of the economy or the level of gasoline prices."

Thanks to Fred Heutte

Full Story:
Published on Monday, March 3, 2008 in The Wall Street Journal
Share Tweet LinkedIn Email