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Demand for Gasoline Falling as Prices Rise

But does that signal a new recession?

by on May.05, 2011

Americans appear to be cutting back fuel consumption as prices approach record levels.

With fuel prices nearing the politically significant $4 a gallon level, industry watchers report that gasoline consumption has begun to slow.

The question is whether motorists are simply reining in their time behind the wheel through careful route planning – or whether the decline signals the start of a new recession, as fuel consumption is often linked to spending in other areas of the economy.

Gas consumption has dropped by more than 1.2%, year-over-year, during the last four weeks, according to data tracked by MasterCard SpendingPulse.

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The nation is using 13% less gasoline – about 1.2 million barrels a day – than it did in 2007, when consumption peaked.

Analysts say much of that was due to the recession, the jobless no longer needing to commute, but studies have shown that U.S. drivers are also taking steps to reduce driving by such things as route planning before running errands.


Are Rising Gas Prices Crushing the Economy?

Fuel costs double their share of consumer spending.

by on Apr.13, 2011

$4 gas is becoming the new norm.

Karen Silverman scowls as she starts to fill up her 2007 Jeep Grand Cherokee, the numbers on the dial spinning too fast to follow until the pump clicks off at $62.

“When I got the Jeep, it wouldn’t cost me half that,” she laments.  “That’s money I could use for a nice dinner or a movie.  Now it just goes to the oil company.”

With much of the country now paying $4 a gallon, and further increases likely, millions of motorists are having to face the same decision as Silverman, a suburban Detroit legal assistant.  Prices have risen an average of 80 cents a gallon over the last year, according to the AAA, and they’ve more than doubled since slumping to an average $1.86 a gallon following the mid-2008 fuel scare.

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According to various data, Americans are now devoting an average 5% of their income to pay for gasoline, up from a little more than 2% just two years ago.

“The surge in oil prices since the end of last year is already doing significant damage to the economy,” says Mark Zandi, chief economist at Moody’s Analytics.