How High Gas Prices Are Changing Consumer Behavior—and Why So Little Seems to Change in the Long Run

  • Share
  • Read Later

Most Americans say high gas prices are hurting their families financially, and that they’ve made some lifestyle changes—altering vacation plans, fewer trips to the supermarket—to compensate. But are we finally reaching the point when the majority of people will make major changes by broadly adopting more fuel-efficient cars and moving to cities to be closer to work?

The answer to that question is uncertain. But it sure seems like we’re not there yet.

No doubt that consumers are aware of and affected by today’s gas prices. A new USA Today/Gallup Poll has it that nearly 7 in 10 Americans say that the current cost of fuel is causing financial hardships for their families, and 21% say that their standard of living is in jeopardy due to the added cost of more expensive gasoline.

The NY Times, meanwhile, reports of gas-related indicators such as fewer cars and more buses on San Francisco’s Golden Gate Bridge, less customer traffic in major chains such as Lowe’s and Walmart, and an uptick in online shopping. The Times also mentions the number of gallons of gas pumped has fallen (down 1% from last year), and that car sales are up (rising 18% last month compared to April 2010, with a particularly increase in fuel-efficient vehicles). The story’s opening anecdote involves a woman moving to a new rental home to be closer to work.

Clearly, these are all indications that high gas prices are having an impact. But how much of an impact? Nothing too-too drastic, the Times states:

Over all, the economy, though still slowly mending, has largely been able to shrug off the effects of high gas prices.

Now why is that? Why haven’t people taken more dramatic steps to adjust to gas prices rising 30% in a year? Instead of a small percentage of people buying cars with better gas mileage, why haven’t consumers shifted en masse to vehicles that get 40 mpg or better? Or why hasn’t a large percentage of people moved to places where they have less need for cars?

In theory at least, the majority of Americans support the call to require automakers to make cars that are far more fuel-efficient than they are today. In a new survey from the Consumer Federation of American (written about by the Christian Science Monitor), 75% of those surveyed said they believed it’s important to improve fuel economy standards, and 62% support mandates requiring automakers to meet 60 mpg standards by 2025.

Seems like Americans are already on board. But it’s easy to agree with some concept that wouldn’t be a reality for more than a decade—and that consumers think they wouldn’t have to pay for anytime soon.

The truth is that consumers make decisions based on their own sense of good value, which may or may not include what’s good for society or good for the environment. Electric cars aren’t considered good values yet, for the most part. That could change if—and these are some big ifs—gas prices continue to rise, and never dip like they did soon after the gas price hikes from just three years ago.

In the USA Today/Gallup Poll, 54% of those surveyed believed that high gas prices are here to stay. That’s a lot of people. But that also means that nearly half of people have an inkling that high prices at the pump will fade sometime down the line.

For many consumers, there’s just too much uncertainty with the economy and gas prices alike to make decisions they’d be living with (and paying for) for years. A Boston Globe columnist explains how, during the $4-a-gallon summer of 2008, he considered buying a car with better fuel economy, but wound up relieved that he sat on his hands:

I hesitated, and my vacillation was well-rewarded. Three months later, prices fell like a rock, dropping to $1.59 by the end of the year. All of you who had paid a premium for a new Prius had been fooled.

Consumers don’t like being messed with, especially not when it comes to a purchase that’ll easily cost over $20K. There are plenty of drivers out there who are interested in hybrids and electric cars but don’t want to feel like suckers for buying one unless it’s sure to make economic sense. The Globe columnist (Tom Keane) explains the rationale of quite a few consumers:

We may say we favor cutting oil use, but we still want cheap gas. The two notions are incompatible. Sermons about conserving and gauzy ads about being green don’t work. If you really want me to reduce my gasoline consumption, you have to make it worth my while.

So, unless it’s proven to be worth the consumer’s while—in the long run, not just while the gas companies are messing with consumers during a six-month price rise that somehow inexplicably disappears—the average consumer is probably going to just keep doing what he’s doing, living where he’s living, and driving what he’s driving.

A Brief List of Goods and Services at All-Time High Prices
Thinking About Buying a New Car? There’s Good Incentive to Wait