Gas prices rise, demand begins to slip
Gas prices have risen above $3.50 a gallon in most of the US. With gas prices rising, Americans are cutting back on trips to the pump.
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Americans also appear to be turning to smaller, more fuel-efficient cars to save on gas. Sales of the Hyundai Sonata and Elantra soared 55 percent in March. Meanwhile, sales of Chevy's Suburban SUV dropped nearly 24 percent.Skip to next paragraph
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MasterCard's report shows drivers bought 2.7 billion gallons of gas last week, down 3.6 percent from the same period in 2010, when it was 80 cents cheaper.
The decline is somewhat puzzling because Americans typically curb their driving only as a last resort, after sacrificing other forms of discretionary spending, like shopping for new clothes, or going to movies, concerts and restaurants.
But demand for gas is falling while other types of spending are on the rise. Retail sales rose 2 percent in March compared with a year earlier, surprising economists who were expecting no increase or even a decline.
Gamel said it's too early to tell whether this is the kind of long-term decline in demand that the economy endured during the recession. Prices already are in the range when Americans started to leave their cars in the driveway several years ago. Drivers began to cut back on gas in October 2007, when the national average approached $3 per gallon.
Even if demand for gas keeps falling in the U.S., it probably won't be enough to force the price down. That's because worldwide demand for crude oil keeps rising.
Global demand for oil is about 87 million barrels per day, matching its peak from 2007. It is expected to grow to more than 88 million barrels a day by year's end, with most of the increase coming from China. At the same time, supply is shrinking because of uprisings in Libya and elsewhere in the Middle East.
In the United States, people are watching their local gas stations a little more carefully. Some are even getting rid of their old gas-guzzler.
Andrea Meyer of Manteno, Ill., has done both. She buys gas in the middle of the week because prices seem to jump over the weekend. And she recently sold her 2005 Chevy Envoy SUV and bought a 2011 Chevy Cruze, which gets 30 miles per gallon. She still spent about $200 on gas for the new car from mid-February to mid-March.
"I won't go hungry tomorrow," she says. "It's just taking away from me getting ahead faster. It throws off everything. It immediately makes you reprioritize."