June 25, 1995 in Nation/World

Gas Prices Are Highest Since 1990 Got A 4x4 Or Minivan? Then You’re Partially To Blame

Agis Salpukas New York Times
 
Tags:costoil

Gasoline prices are up more than 13 cents a gallon from last summer, reaching their highest levels since late 1990, after Iraq invaded Kuwait.

A number of factors are pushing up those prices, including increases in federal and local taxes and higher refining costs to comply with environmental rules for reformulating gasoline.

But a significant part of the increase, energy economists say, is coming from Americans’ love affair with Jeeps and other sport utility vehicles and for pickup trucks and minivans, with their relatively low fuel economy.

The growth in the number of those vehicles - they now account for 40 percent of all vehicles sold, more than double the share of 10 years ago - has greatly increased demand for gasoline, the economists say. And that demand is helping drive up the cost of fuel, with the average price of unleaded regular gasoline at $1.22 a gallon as of June 9, up from $1.09 a year earlier. Spokane prices were a bit lower last week, ranging from $1.17 to $1.22 at surveyed stations.

Call it Cherokee madness or Bronco fever. One symptom is that many drivers say they are not concerned about the higher cost of driving; indeed, they are using their rugged vehicles not only for outings like camping trips but also for running errands and commuting.

The recent increase in prices has been the biggest since 1990 - when a 23-cent jump was registered in the month after Kuwait was invaded. But the cost of gasoline is still not high in historical terms.

After adjusting for inflation, economists say, the cost is roughly the same as it was in the early 1970s, when the pump price was a little more than 30 cents a gallon, and far less than in 1981, when the average price was $1.35.

Gasoline deliveries to retail stations, a good measure of motorists’ demand, have been running about 4 percent higher than last year. In May, they were up more than 5 percent from the corresponding month last year.

The surge in demand is “inherently implausible,” said Michael Canes, the chief economist for the American Petroleum Institute, the industry trade group that compiles the delivery figures.

“Yet we’ve gone over the numbers and we haven’t found a mistake,” he said.

The U.S. economy, considered healthy but not booming, is an unlikely source of increased demand. The normal seasonal increase in driving at this time of year, plus the small loss in fuel economy from the switch last January to reformulated gasoline, is not enough to account for such a jump, he said.

The only possible explanation, according to some oil industry economists, is Americans’ growing use of sport utility vehicles, pickup trucks and minivans.

“They drive recreational vehicles for errands. They don’t ask what the mileage is,” said Theodore Eck, the chief economist for Amoco Corp. “They don’t want to know what the price of gas is. They’re looking for comfort, size and performance - not mileage.”

A recent survey by Allison-Fisher Inc., an automotive research firm in Southfield, Mich., asked car buyers to rank 20 factors in their buying decision. Dependability was first. Fuel economy was last.

“The trend toward more powerful engines, the shift to trucks and greater luxury, has offset the technical gains that we’ve made in fuel economy,” said John DeCicco, a senior associate for the American Council for an Energy Efficient Economy, a nonprofit research group in Washington.

While the pump price of gasoline, adjusted for inflation, is about the same as it was two decades ago, gasoline’s share of driving costs has actually declined because of improvements in fuel economy.

DeCicco said the cost of gasoline was now about 6 cents for every mile traveled, compared with 9 cents in 1973, after adjustment for inflation.

The Clinton administration and Congress have shown little willingness to push up the fuel economy standards or to penalize people who own less efficient vehicles with new taxes, although higher federal and state taxes have accounted for about 2 cents of the price increases of the last year.

And new legislation in Congress would end federally imposed speed limits, a change that could encourage higher-speed driving and further cut gas mileage.


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