Despite high gas prices, Americans keep on driving

As Daniel Franco fills up his Ford Sport Trac, he watches the dollar meter on the pump tick past $40 before it finally stops. "Just a few months ago it used to cost just $25," he says, shaking his head.

Like most Americans, Mr. Franco is not happy about the high price of gas. But he's also convinced there's not much he can do about it because, as for many Americans, driving is an integral part of his work. And he's not about to trade in his Sport Trac for a fuel-efficient Mini - he needs the room in the truck for his building materials.

With gasoline prices reaching new highs, some analysts expect Americans to be working to hold the line on fuel consumption. But so far, there are very few indications that's happening - in part, because the overall economy continues to grow.

Gas-guzzling SUVs continue to fly off showroom floors. In fact, the bigger ones are selling better than the more efficient compacts, according to WardsAuto.com. And groups that monitor Americans' driving patterns haven't seen any drop in demand at the pump. To the contrary, it's at an all-time record high of 8.8 barrels a day, according to the Energy Information Agency. And while there has been a flurry of "gas and dash" thefts, according to the Petroleum Marketers Association of America, the number pales in comparison with that during the energy crisis 20 years ago.

Indeed, most experts say prices will have to go a lot higher, and stay that way, before Americans trade their traditional SUVs for super fuel-efficient hybrids. "People simply haven't felt the pain adequately to change their behavior," says John Tobin, director of the Energy Literacy Project in Evergreen, Colo.

Experts say it will take a crystal ball to determine just where that threshold is. Last week, gas prices hit a new average high of $1.80 a gallon. Some analysts believe the magic number will be $2 a gallon. Others don't think Americans will change their habits until it hits $3 a gallon - which could come as soon as the Memorial Day weekend.

A survey done by CNW Marketing Research Inc. in Brandon, Ore., found that at $1.75 a gallon, no one planned to get a more efficient car, now or in the future. But if prices went up significantly more, attitudes did start to change. (See chart.)

But some experts believe a short spike in price won't have that much impact. It's when consumers believe prices will stay high for a long time that they'll start demanding more fuel- efficient cars. "The million dollar question is, How long are we going to see sustained high prices?" says Beck Taylor, a professor of economics at Baylor University in Waco, Texas.

Several reasons account for Americans' continued thirst at the pump. One has to do with the fact that gas prices still aren't anywhere near where they were at the height of the energy crisis in 1981 (which was about $3 a gallon adjusted for inflation).

Then there's the question of just how much the family budget is affected. Because overall incomes rose steadily during the 1990s and gas prices remained relatively stable, the percentage of income consumed at the pump remains relatively low. In 2002, the average US household spent 2.9 percent of its income on gas. This year, if prices remain high, gas is expected to consume 3.4 percent of the household budget.

Of course, other factors affect behavior that have nothing to do with the price of gasoline. Just ask Mark Baxter, director of the Maguire Energy Institute at Southern Methodist University in Dallas. As such, he's a great believer in energy efficiency, but that doesn't mean he can persuade his wife to give up her 4-by-4 truck. "She got rear-ended last week. The car that ran into her was totaled, but it only tore a little rubber off the bumper of her truck," he says. "Now to convince my wife to trade in that truck is going to be almost impossible."