Low Gas Prices Bring New Situation for Consumers, Business

13-Jan-09
Published in: Suburban Journals
Author: Eric Becker
Description:

In early 2008, when gas prices started inching upward in what would become a seemingly endless and quickening spiral, perhaps few had the foresight to know what was then $4-a-gallon gas would cost $1.29 by the new year. But lower gas prices do more than charge less to your credit card.

Local residents may not be rejoicing because a gallon of gas costs less than half what it did just a few months ago, but some are making changes, small and large.

MORE TRAVELING, STEAK DINNERS

Anna Funkhouser of unincorporated St. Charles County, stopping to fill her silver Cadillac four-door sedan at the Mobil station on West Clay in St. Charles, said visits to family in Indiana and Kentucky were up since gas prices came down.

"When gas was $4, we would visit once every six months," Funkhouser said. "More recently, it's been once a month."

Funkhouser said with putting two girls through college, paying less to fill up her tank eases some of the financial strain.

"Helping out our girls with college was killing us," Funkhouser said.

Behavior and nutrition change, too, when prices are lower.

"When gas was more expensive, I was driving 55 miles per hour," said Alberto Escobar of St. Charles, of his attempts to economize fuel. "Now I go 60, 65."

Escobar said he had been holding back on expenses, and that his family was paying closer attention to what it was buying. That hasn't stopped as fuel prices have gone down, Escobar said, because he is trying to be conscientious of the tough economy. Still, he allows himself to eat better food now.

"I can have steak once a week now," Escobar said.

GAS STATIONS STOCKING C-STORES

Greg Seitz, a manager at the BP station at 1340 S. Fifth St. in St. Charles, said business at the station tends to pick up with lower gas prices, but it's not easygoing for those in the business, either.

"Now with the economy, people are still watching their money," Seitz said.

Seitz said customers are wary the relief at the pump is only temporary.

Seitz also said there's one way to determine how gas prices are affecting business at a fill station: the stock of snacks in the station's convenience store.

"When gas was $4, the stock was down 32 percent," Seitz said of the store's racks of candy bars and potato chips. "Now that the price is down, we've gained 20 percent back."

Stations without a convenience store weather high gas prices better, Seitz said, because drivers tend only to buy gas and drive away when prices are steep. Those with aisles of snacks may get stuck with a surplus.

"When the price is high, nobody wants to come in, so we're sitting on dead inventory," Seitz said.

When asked if it was a good time to get into the gas business, Seitz said perhaps, but only if one were to operate a gas station without a convenience store.

"If the price can stay down, business should be back to normal (soon)," he said.

Seitz said he sees room for the price to drop another 15 cents. He said gas station operators are subject to much the same uncertainty as consumers filling up their cars when prices drop slightly and then spike 30 cents a few days later.

SCHOOLS LOCK IN PRICES

Some school districts, such as Francis Howell, have locked in fuel prices.

Kevin Supple, the district's chief financial officer, said the district pegged the price unusually low in its bus contract at $1.25 a gallon. According to the contract, Francis Howell only pays the difference for fuel between the pegged price and the current price of diesel. So, while the district was hurting with record-high fuel prices last summer, it is actually faring better now.

During the 2007-2008 school year, the district paid $730,000 in fuel surcharges. This year, Supple said he expects the fuel tab to be considerably less.

WILD SWINGS MAKE PLANNING DIFFICULT

Prices that have swung from nearly $150 a barrel to $30-something a barrel have left a trail of perplexed consumers in their wake. This comes as economists warn oil prices will be subject to similar fluctuations in years to come.

Advocates of peak oil theory -- which suggests oil production has or will soon reach its peak, leaving to wild price swings -- warn an upward swing is just around the corner.

The Organization of Petroleum Exporting Countries has pledged production cuts in an attempt to shore up the damage being done to their economies by low oil prices.

Two Webster University economists say consumers and businesses shouldn't plan for long-term relief from higher fuel prices.

James Metzger, who studies resource economics and teaches at Webster's campus in Little Rock, Ark., says once the economy picks up, business demand in the United States and in developing economies like China and India will put pressure on tight supply, sending fuel prices upward.

NOT A PERMANENT VACATION

Jeffrey Bramlett, another Webster economist, shares the view of many economists that gas prices will begin to climb with economic recovery, making the need for alternative energy sources paramount to energy availability and affordability to consumers in the future.

"I typically advocate some form of a mild tax on fossil fuels for various reasons. Principal among them is that it discourages consumption while making alternative fuels more attractive," Bramlett said.

And, Bramlett said, it would likely provide secondary benefits in terms of reduced air and water pollution.

In order for the tax revenue to be beneficial, however, Bramlett said that revenue should be put toward alternative energy research.