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Gas Prices Falling, but Drivers Getting Used to Higher Costs

Posted on: Tuesday, 6 June 2006, 21:00 CDT

By Gary Richards, San Jose Mercury News, Calif.

Jun. 6--Gas prices continue to ease from record-setting levels, as has the rage of motorists over filling up for more than $3 a gallon.

Callers to radio talk shows have focused on today's election, immigration and the Dixie Chicks vs. George Bush. Politicians are no longer holding news conferences on possible gas gouging. E-mails to the Mercury News zero in on motorcyclists who split lanes.

At the pump: All is calm.

"I have not been told by any of the cashiers that people are griping anymore," said Jan Root, who manages a Shell station in West San Jose where prices have fallen from $3.32 a gallon on Memorial Day to $3.19 on Monday, 11 cents below the state average of $3.30.

The new reality: Drivers seem to be getting used to gas at $3-plus a gallon. Just like they did a decade ago when gas first soared past $2 in California, drawing outage and promises of probes into the behavior of Big Oil.

"When it comes down to it what choice do we have?" said David Cohen of Morgan Hill, a copy editor at Hitachi Data Systems who says current prices have added $25 to his family's weekly gas bill. "We pay the price or else we don't go to work or shopping. So we may spend less on trips to Costco, Wal-Mart or Safeway.

"I learned a long time ago that you can't be angry with something you have no control over. Gasoline prices is one of those things."

Cohen's reaction shouldn't be a surprise, said Eric Skrum, a spokesman with the National Motorists Association in Washington, D.C.

"I think that it is more resigned than anything," he said. "My impression is that a good portion of these complainers can afford the price hike and have moved on. They don't like it, but their complaints haven't gotten them anywhere so they've moved on."

The North Bay has seen some of the biggest declines, with several stations in San Rafael falling to $2.99 a gallon. The average price for a gallon of self-serve regular was $3.26 today in San Jose, down a dime from a month ago.

But alert drivers can fill-up for a lot less. Gas was going for $3.09 a gallon at discount stations at McKee Road east of Highway 101 today. Everywhere, it seems, stations have been lowering prices by a couple of cents a day.

Federal officials say the average price could fall to $2.76 a gallon nationwide this summer. That would likely mean prices of $2.90 to $3 a gallon in California, which typically is 20 to 30 cents higher than the rest of the country.

"Under $3 certainly could happen," said Jerry Cummings of Rotten Robbie, adding that "to some extent under $3 will look like a bargain as those who can afford higher prices get used to it."

Questions about the price threshold at which drivers change their behavior are good ones, said Rob Schlichting, a spokesman for California Energy Commission.

"Experts were once sure they knew the answer: $2 a gallon," he said. "But that threshold came and went without bringing the economy to its knees, or causing drastic changes in consumer behavior. Now the question remains: Is $3 a gallon the critical price level for consumers?"

Perhaps. Toyota sales increased by double digits in May, mainly because of the popularity of its gas efficient hybrids. But GM sales dropped 12 percent as it continued to push sales of sport-utility vehicles, offering buyers in Florida and California rebates on gas purchases.

"We're now seeing some car commercials that talk about fuel efficiency instead of speed. Imagine that," Schlichting said. "And Ford and GM's latest attempt to sell gas-guzzlers by promising $1.99 a gallon gasoline through rebates will probably backfire. All it does is reinforce the idea that gas prices are high."

Crude oil is expected to remain near $70 a barrel in the next year and while world oil consumption demand has slowed because of higher prices, consumption will pick up from 1.7 million barrels this year to 1.9 million barrels in 2007. While retail prices could slip to $2.80 or so a gallon in California next year, one threat from Iran or more fighting in Nigeria or another horrible hurricane season and all bets are off.

"I agree that $3 will soon start seeming normal to most drivers," said John Theobald, founder of the UC Oil Forum, which explores issues of oil and gas production at the University of California at Davis. "What's striking is that few seem to understand that higher energy costs are a trend in its very early stages. . . . In short, $3.50 for a gallon of gas is cheap and soon will be seen as cheap."

Back to the gas station, where Prashant Modi, a 45-year-old engineer from Pleasanton who often eyes other drivers as they fill up.

"I still see a lot of SUVs and other gas guzzler vehicles at the pumps," said Modi, who commutes to Hewlett-Packard in Cupertino, "and don't really hear any grumbling from them."

Contact Gary Richards at mrroadshow@mercurynews.com or (408) 920-5335.

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Copyright (c) 2006, San Jose Mercury News, Calif.

Distributed by Knight Ridder/Tribune Business News.

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Source: San Jose Mercury News

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