$3.44 Is 'Too High' Mark for Many Motorists

AAA's new consumer index pegs gas-price breaking point

Published in CSP Daily News

WASHINGTON -- Half of U.S. adults consider gasoline prices to be "too high" when it reaches $3.44 per gallon, indicating a potential breaking point on prices, according to a new consumer price index developed by AAA. Approximately two-thirds of Americans (62%) are offsetting high gasoline prices by changing their driving habits or lifestyle.

"It was not long ago that motorists were shocked to pay more than $3 per gallon for gasoline, but now that is standard at stations nationwide," said Robert L. Darbelnet, AAA president and CEO. "Today's average consumer feels a breaking point on high gas prices closer to $3.50 per gallon, and expensive prices have forced many motorists to change their driving habits."

AAA's gasoline-price index tracks consumer attitudes by determining at what price the cost of gasoline becomes too high. The results from the open-ended survey demonstrate how attitudes can be expected to change as prices rise above significant milestones:

  • 46% believe gasoline is too high when the price reaches $3 per gallon.
  • 61% believe gasoline is too high when the price reaches $3.50 per gallon.
  • 90% believe gasoline is too high when the price reaches $4 per gallon.

"It is possible there is a new normal in terms of consumer attitudes now that gas prices have remained above $3 per gallon for more than two years," Darbelnet said. "Most people have resigned themselves to paying higher gas prices and are cutting back on driving, shopping and dining out to save money."

Consumers report changing their driving habits or lifestyle in a number of ways to offset recent gasoline prices, including:

  • Driving less: 86%.
  • Reducing shopping or dining out: 71%.
  • Driving a more fuel efficient car: 54%.
  • Delaying major purchases: 53%.
  • Working closer to home: 39%.
  • Carpooling: 33%.
  • Using public transportation more regularly: 15%.
  • Other: 18%.

Younger consumers ages 18 to 34 are more likely to offset recent gasoline prices by working closer to home or using public transportation more regularly than adults ages 35 and up (48% vs. 35% and 25% vs. 10%, respectively). These results could suggest a generational shift in terms of attitudes towards driving, but it is too early to say whether these attitudes would continue into the future.

The national average price of gasoline on Tuesday was $3.52 per gallon, but prices currently vary by more than $1 per gallon nationwide. The national average has remained above $3 per gallon for 28 consecutive months, and above $3.44 per gallon for 82 days. While the national average has not surpassed $4 per gallon since 2008, it is not uncommon for motorists living in the West Coast, Northeast and near the Great Lakes to pay more than $4 per gallon.

AAA developed the price index by asking respondents, "At what price do you start to consider the cost of gasoline to be too high? Please tell me the price per gallon to the nearest 10 cents." AAA combined the answers from 974 respondents to determine the potential consumer breaking point for high gasoline prices.

Meanwhile, in its Fuel Gauge Report for April 22, the national average price for a gallon of regular unleaded gasoline of $3.52 is a penny less expensive than one week ago, but it is 16 cents less than one month ago and 35 cents less than one year ago. After declining for 45 of 51 days the national average has now increased for three straight days. Despite this recent string of rising prices, the national average remains 27 cents below the peak 2013 price to date of $3.79 on Feb. 27. In 2011 the national average for regular unleaded gasoline peaked at $3.98 on May 5. In 2012 the price peaked at $3.94 on April 5 and 6.

While motorists in every state but three (Utah, Idaho and Wyoming) are paying less at the pump  than one month ago, those in some Midwestern states have seen prices climb sharply in the last week following supply concerns from heavy rains in the region. Prices in 43 states and Washington, D.C., are lower than one week ago, compared to four Great Lakes states, which have seen the average price increase more than a dime per gallon (Illinois, 10 cents; Michigan, 24 cents; Ohio, 28 cents; and Indiana, 28 cents).

The recent storms and resulting power outages provided the catalyst for higher retail prices in the Midwest; however, analysts had warned that the region was susceptible to price increases as regional refineries had yet to undergo maintenance and make the transition to summer-blend gasoline production. Gas stations in much of the country must make this retail switch by June 1; however, refineries shift to making summer blend in March and April to meet a May 1 production deadline. During this switch regional production is reduced and supplied markets are more susceptible to unexpected disruptions, as was the case during the recent storms in the Midwest.

The primary factors driving retail gasoline prices lower in recent weeks have been low demand, continued disappointing economic news and lower crude oil prices. This slide in crude oil saw Wednesday's settlement price for West Texas Intermediate (WTI) crude oil, the traditional U.S. benchmark, fall to $86.68 per barrel, which set a new 2013 low. While prices have recovered slightly, they continue to support lower gasoline prices for motorists. At the close of Tuesday's formal trading on the NYMEX, WTI settled up 80 cents at $88.81 per barrel.

Keywords: 
fuel prices, fuels data