Many Americans are determined not to let higher gas be the Grinch that spoils their holiday spending plans.
Gas prices on average have risen about 17 cents since Labor Day, following a $12 increase in oil prices. By one analyst’s estimate, that means Americans are spending around $68 million more on gas each day than in early September.
While that sounds like a threat to sales of Barbie Video Girl dolls and even iPods, on an individual basis the increase amounts to $3 or $4 extra to fill up a car, a bit more for an SUV or a pick-up. Many motorists absorb the cost increases by skipping the gourmet coffee or passing on a movie. Or they drive less.
Cassie Peterson, 25, a health coordinator from St. Paul, said higher prices won’t change what she buys for her nieces, as she pumped gas into a Ford F-350 pickup truck at a SuperAmerica gas station in White Bear Lake, Minn., on Friday. She paid $2.80 per gallon.
“Whatever I see and they like, they get,” she said.
While the national average for gas of $2.86 per gallon is the highest it’s been at the start of the holiday shopping season in three years — and prices have topped $3 in some major U.S. cities — hardly hits drivers with the sticker shock they experienced when gas topped $4 per gallon in 2008.
“If this was the first time, it would have huge implications,” said Marshal Cohen, chief industry analyst at market research firm NPD Group. “But consumers have seen this several times before.”
Analysts like Cohen do concede that the $3 mark does make drivers notice and can influence spending habits.
“It stinks,” said stockbroker Jack Landers, 64, as he paid $3.11 at a service station in a suburb of Albany, N.Y. earlier this week. He estimated that a fill-up now costs him an extra $6 that “I’m not gonna spend on coffee at Starbucks or getting the extra bag of chips at lunch.”
Analysts expect most Americans will similarly choose to forgo those smaller things instead of gifts.
“For this holiday season, I think consumers are kind of holding the course,” says David Portalatin, director of industry analysis for the NPD Group. After two years of severe recession, “they’re trying to get back to normal.”
Still, some people will have to make steep concessions.
In Hartford, Conn., Michael Hardaway, 54, paid $3.10 a gallon for gas for his Chevy Silverado. He said he will reduce his spending on Christmas gifts and his charitable donations. He’ll even skip a trip to visit his daughters in New Jersey.
“What’s the reason for it going up? Our economy is still at a standstill,” he said.
The lackluster U.S. economy is in fact a reason that gas is high. It isn’t growing enough to get unemployed Americans back to work in meaningful numbers. The Federal Reserve’s plans to boost growth have decreased the value of the U.S. dollar. That made oil, priced in dollars, more attractive to holders of foreign currencies like the euro.
Add strong demand from China and emerging markets like India, and oil rose from about $72 a barrel in early September to just above $88 a barrel earlier this month.
Gas prices tagged along, rising from $2.68 a gallon just to about $2.89 a gallon earlier this month. For every penny the price at the pump increases, it costs consumers an additional $4 million, Cameron Hanover energy analyst Peter Beutel said.
The good news for drivers? Prices have started heading down. Demand for gas in the U.S. remains weak, And China has taken steps to cool its economy, which could reduce its need for energy and push oil prices lower.
Gas prices are already falling because oil prices dropped over the 10 days. Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, thinks gas prices will eventually fall to $2.75 a gallon before the end of the year.