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April 11, 2005
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| Energy officials predict gas prices will continue to go up. (MPR Photo/Lorna Benson) |
St. Paul, Minn. — When the federal government's Energy Information Administration released its gasoline forecast recently, the agency predicted that prices will remain between $2.10 and $2.35 a gallon for the next two years. That's because crude oil supplies are tight. Crude oil is used in the production of gasoline. The agency says OPEC is pumping as much crude as it can, but so far it hasn't been able to keep up with a surge in worldwide demand.
The agency's senior analyst Mike Burdette says U.S. gas demand is climbing 1 to 2 percent per year, despite the high gas prices.
"No one really knew if you saw gasoline prices ... consistently above $2 a gallon, would we see demand fall off? And the answer is that so far we've seen relatively little what we call elasticity of demand in response to these high prices," says Burdette.
Bob Saumur knows why demand is not dropping, at least in his household.
"I have to do my job," says Saumur, who lives in the northern Twin Cities suburb of Coon Rapids. "So I will pay what I have to pay."
Saumur's sales job requires him to drive about 40,000 miles a year. His Ford Contour sedan gets about 27 miles per gallon. At that rate he will pay an extra $740 this year compared to last year, if current gas prices hold.
"It's like getting poked in the eye with a stick, I suppose, every time I go up to the gas pump," says Saumur. "But it's just something that I have to put up with."
Saumur shops around for the best pump price. He also buys prepaid gas cards at a discount. He pays for them with a credit card that has a 5 percent rebate for gas station purchases. Saumur says timing is important too. He doesn't buy gas on weekends.
"A gas station manager told me to buy gas before 10 a.m. on Thursday. That's when they seem to push the prices up," says Saumur.
In nearby Shoreview, Hans Molenaar uses some of the same strategies. He clips gas coupons and he makes sure his vehicles are tuned up. His family just started combining trips to the grocery store, the bank and the mall to save on gas. Molenaar is pretty sure he'll leave his speedboat behind when his family goes on vacation this summer.
He's also contemplating more painful choices, including whether to send his second youngest child to preschool.
"The preschool that we sent our other children to is 10 miles away," says Molenaar. "Can we continue to do that at $2.50, $3 a gallon? I don't know."
Molenaar has another dilemma he's weighing -- whether to trade in the family's 1999 Chevrolet Suburban for a vehicle that gets better gas mileage.
"I told my wife if it hits $2 a gallon, I don't know how we'll be able to afford to drive it," says Molenaar. "Now we're at about $2.25 on average in the northern suburbs here. And I'm saying $2.50 is going to be the max out, before we're going to have to look for something different."
Molenaar wants to keep the Suburban if he can, because he believes his wife and four kids are safer driving in a big vehicle.
Minneapolis motorist Donna May has a similar problem. Her 1993 Jeep Grand Cherokee has a V-8 engine that she says uses a lot of gas. She would prefer a fuel efficient car. But May travels to sheepdog competitions and needs a vehicle with hauling power.
"I recently purchased a little camper to pull behind to save on hotel expenses. So I need a certain vehicle to tow that," says May. "I don't drive this size vehicle because I just can. It's a necessity." At current prices, May figures she will pay about $275 more this year for gas.
"I look at it one way and think, it doesn't sound like too much per year. But at the same time, that additional $300 almost could determine whether I could squeeze out a small vacation," says May.
Even though statistics show that most Americans haven't reduced their gas consumption yet, energy analysts believe there is a point where they will. They had thought that point was $2. Now they're saying it might be $2.50 or even $3 a gallon.
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