No family visit, no travel: the hard cost of gas prices

Highest level for a gallon since 2014; U.S. average reaches $3.41

A driver in Belleville, N.J., cut his cable and downsized his apartment to save money for gas. A retiree in Vallejo, Calif., said he had stopped driving to go fishing because the miles cost too much in fuel. An auto repairman in Toms River, N.J., doesn’t go to restaurants as often. And an Uber Eats deliveryman said he couldn’t afford frequent visits to his family and friends, some of whom live 60 miles away.

“Times are tough right now,” Chris Gonzalez, 31, the Uber Eats driver, said as he filled up his tank at a Safeway gas station off Interstate 80 in California.

Millions of American drivers have acutely felt the recent surge in gas prices, which last month hit their highest level since 2014. The national average for a gallon of gas is $3.41, which is $1.29 more than it was a year ago, according to AAA. Even after a recent price dip in crude oil, gasoline remains 7 cents more per gallon than it was a month ago.

While consumers are seeing a steady rise in the prices of many goods and services, the cost of gas is especially visible. It is displayed along highways across the country, including in areas where a gallon has climbed as high as $7.59.

Steeper gas prices are pushing people to rejigger household budgets, sometimes by forgoing leisure activities and in other cases by cutting back spending on essentials. Many are trying to save by spending less time on the road, a difficult proposition as the holiday season approaches, and with it the temptation to make up for the lost celebrations of last year. Just 32% of Americans plan to drive for Thanksgiving, down from 35% last year, at the height of the pandemic, and 65% in 2019, according to a survey from the fuel savings platform Gasbuddy.

Consumers glimpsed the prospect of some relief this month as oil prices fell, responding to a strengthening U.S. dollar along with concerns about impending COVID-19 lockdowns in Europe, and gas prices began to stabilize. Although there is normally a delay between a drop in oil prices and cheaper gas, President Joe Biden instructed the Federal Trade Commission this past week to investigate why prices at the pump haven’t declined as much as might be expected, citing the possibility of “illegal conduct” by oil and gas companies. The administration also is facing calls from Congress to tap the country’s Strategic Petroleum Reserve, which the Senate majority leader, Chuck Schumer, said would help struggling Americans.

Gas prices have gone up in part because of fluctuations in supply and demand. Demand for oil fell precipitously in the early months of the pandemic, so the Organiza

tion of the Petroleum Exporting Countries and other oil-producing nations cut production. In the United States, reduced demand led to a substantial decline in drilling; the country’s oil rig count was down nearly 70% in summer 2020.

But over the past year, demand for oil recovered far faster than OPEC restored its production, and crude oil prices doubled to as much as $84 a barrel. (Since Nov. 9, the price has declined to just over $76.)

The shutdown of some large American refineries during the pandemic also tightened the oil supply. Since the beginning of 2020, some 5% of the country’s refining capacity has closed, responding to a decline in travel.

“When you have demand recovering but you’ve eliminated permanently some source of the supply, then prices go up,” said Andy Lipow, president of Lipow Oil Associates, a consulting firm in Houston. “The consumer is feeling pain at the pump.”

For drivers, the rising costs have added stress to commutes and weekly routines; suddenly, popping out for errands or dropping children at school has taken on new financial weight. Like breakdowns in the supply chain to labor shortages, gas prices have contributed to a growing sense among consumers that the economy is not fully functioning for them.

Aldo Mccoy, who owns an auto repair shop in Toms River, watched the numbers on a gas pump flash higher Wednesday as he filled up the tank of his 1963 Chevrolet Impala. He recalled recently filling his 2003 Cadillac Escalade and seeing the price go above $100, where it used to be $45.

Mccoy said he and his staff were working more than 15 hours of overtime each week to compensate for the extra money they spent on gas. He also cut back on his household spending.

“You don’t go out to stores much, or out to dinner,” he said. “You can’t travel to enjoy yourself. It’s off the table now.”

Louise Tomitz, 74, who is retired and lives on Social Security in Toms River, said the price of gas was making it difficult to cover the costs of visits to her daughter nearly an hour away in Middletown, N.J.

“I don’t work now, and then you have to pay all this extra money for gas. And it’s affecting my budget,” Tomitz said. “It’s getting rough.”

Drivers shocked at gas prices are seeing more than just the effects of crude oil costs. Compliance with renewable-fuel standards can add more than 10 cents per gallon, the price of ethanol has increased, and labor shortages in the trucking industry have made it more expensive to get gas from terminals to stations.

Energy analysts point out that gas prices have been higher in the past; in 2008, the national average rose above $4.10 per gallon. (Adjusted for inflation, that would be equivalent to $5.16 today.) They’re optimistic that the increase in travel and gas demand is a reflection of the economy’s rebound from the pandemic, although they worry that rising prices could make people cut back on other spending.

“If gas prices rise so much that it affects consumers’ disposable incomes, this would weigh on discretionary spending,” said Fawad Razaqzada, a market analyst at Thinkmarkets. “It would be bad news for retailers.”

In California, where the average price of a gallon is the highest in the nation, at more than $4.60, drivers said they were changing their behavior. Some sought out cheaper spots, like Costco and Safeway gas stations, to save a few dollars.

At an Arco station in San Francisco’s Nopa neighborhood, a line of cars extended into the crowded street Thursday. Some drivers searched for change. Others grumbled about the prices, which have shot up to as much as $4.49 at the Arco — known locally for its normally cheap rates — and up to $5.85 in the most expensive part of the city.

Keith Crawford, 57, who was filling up his Kia Optima, said he had taken to getting smaller amounts of gas twice a week to soften the blow to his bank account.

“You have to spread it out in order to stay afloat,” said Crawford, a concierge. “It’s part of the budget now.”

Thirty miles northeast of San Francisco in Vallejo, drivers lined up at the Safeway gas station off I-80, where the price was $4.83 per gallon. Several put the blame for their bills on the Biden administration.

“It’s Biden, Gavin Newsom — look at the gas taxes we pay,” said Kevin Altman, a 54-year-old retiree, referring to California’s governor.

Altman paid $50 to fill up his Jeep and estimated the gas would last him just two days. He said he had stopped driving to go fishing in nearby Benicia to avoid using too much gas, and would do all his Christmas shopping online this year.

The cost can be especially challenging for people who own businesses that depend on transit. Mahmut Sonmez, 33, who runs a car service, spends nearly $800 on gas out of the $2,500 he earns each week driving people around New Jersey. To save money, he moved in September into a Belleville apartment that is $400 cheaper than his previous home.

He also cut his cable service and changed cellphone plans.