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By Chris Woodyard, USA TODAY
LOS ANGELES — Lots of things cost about three
bucks, from a pair of socks to a takeout burrito. But one of life's
essentials has never made the list.
Until now. A handful of service stations in California, Illinois, Nevada, Washington state and Hawaii have begun selling self-serve unleaded regular gasoline for — gulp — $3 or more a gallon. Truckers are enduring three-buck diesel fuel in some places. (Video: Prices continue to troll record highs) With oil prices continuing to climb — worries about refinery outages pushed oil to trade at a record $67.10 a barrel last week before it dropped back to $66.27 Monday — $3 gas is a trend that could eventually spread.
Of course, gasoline isn't the first product to crash through the electric fence of pricing. No one drops a dime for a local pay-phone call anymore. It's been eons since Motel 6 charged $6 a night. But as the lifeblood of daily commuters, long-haul truckers and teenagers going on dates, fuel can make tempers flare faster than just about any other commodity. (Audio: Prices not likely to come down until fall.) "It's robbery," said Robert Mercado, 59, a corporate security manager from Yorba Linda, Calif., as he pumped $3.09-a-gallon unleaded regular at a Texaco station in Los Angeles last week. The drift toward the dreaded $3 mark would make gasoline the most expensive it has ever been even on an inflation-adjusted basis, not just a nominal one. Gas hit a record $1.417 in March 1981, the Energy Department says. Adjusted for inflation, that's $3.04 today. Gas prices have a long way to go before $3 becomes the norm rather than the exception. The government said Monday that gas averaged a nominal record $2.550 a gallon, up 18.2 cents over the past week. Motorist club AAA said its average Monday was $2.48, up 7.1 cents overnight. Among states, California was the most expensive at $2.758; South Carolina the cheapest at $2.337. Price shock Leading the gas price parade are the stations selling unleaded regular for $2.999 and up — 19 of them out of 92,792 in a daily survey by GasBuddy.com, a Web site that tracks gas prices daily using reports from consumers. Metro areas where motorists may stumble upon the most expensive self-serve regular in the country include Chicago, Los Angeles, the San Francisco Bay Area, San Diego and the Hawaiian island of Maui. The first reaction is usually shock. "Three dollars? You got to be kidding me. That's crazy," said Mike Lewis, 33, a Houston-based sales manager, recounting his thoughts as he pulled into the $3.09-a-gallon Texaco station near Los Angeles International Airport.
Because he was topping off a rental car that he was returning, he escaped relatively unscathed. He shelled out $13 for 4.2 gallons. Three-buck gas "is a defining moment in my pocketbook," said Patrick Hearn, 35, another customer at the Texaco station. But he consoled himself with the thought that, "They pay twice as much in Europe." Ashok Chopra, who runs three gas stations, says he has no choice on price. Profit margins at his Shell operation in Inglewood, Calif., where gas was $2.999, stay the same no matter how prices rise or fall. Oil accounts for half the price of gas. Current high oil prices have been blamed on everything from concerns about political instability in Saudi Arabia to outages in U.S. refineries to a surging world thirst for oil, especially in China. The rise in oil prices have brought bigger profits for oil producers. The largest, ExxonMobil, earned $7.8 billion in the second quarter, up 35% from a year earlier. Meanwhile, nearly two-thirds of 1,000 adults responding to an Associated Press-AOL News 48-state poll released last week said rising gas prices will cause them financial hardship over the next six months. More than a third said the hardship will be serious. Yet many economists are doubtful that a rampage through the $3 barrier will be enough to jolt motorists into conservation. Just another number? Rather than gingerly accelerate from stoplights or drive less, drivers are more likely to curse-and-bear-it. As proof, experts point to the nil effects of the last cataclysmic fuel-pricing event — $2 gas. The government says the national average first breached the $2 mark in May 2004. "Three dollars is the new two dollars," says AAA spokesman Mantill Williams. "Before, the prevailing wisdom was that once it reached $2 a gallon, people would dramatically alter their behavior. ... But what we found is that it didn't turn out to be the case." Instead of inciting revolution, the hubbub over $3 could quickly become yawns. The Business Press, a weekly newspaper covering the Inland Empire counties of San Bernardino and Riverside east of Los Angeles, quoted a noted economist in April 2004 as predicting dire consequences if gas hits $3 a gallon. "Distribution, agriculture, retail and heavy construction could all get hurt real bad," said Jack Kyser, chief economist of the Los Angeles County Economic Development Corp. And now? "I would take that all back," Kyser says. (Related story:As prices rise, businesses get creative) He points to booming auto sales as proof that consumers are still buying gas guzzlers even in the face of soaring prices. "They complain about the cost of gasoline, but when GM, Ford and Chrysler had their employee-discount programs, guess what they bought?" Kyser says. "You're watching this and scratching your head." Some signs of change Other economists argue that conservation is starting to take hold in subtle ways. U.S. demand for gasoline has been relatively flat all year, says John Felmy, chief economist for the American Petroleum Institute. Families with multiple cars may be getting more miles out of the most economical model. Interest in fuel-friendly hybrid cars is growing. And before automakers' big discounts to clean out bloated 2005 model inventories, sales of SUVs and other large vehicles were struggling, says Comerica Bank chief economist Dana Johnson.
"Most people are already making changes. It's incremental and hard to see," he says. Barnum Bennett, 35, a database marketing specialist and father of two from Denver, says he may downsize out of his full-size SUV when the time comes because of gas prices. "What used to be a nice family vehicle will be a hindrance" if $3 gas becomes the norm. For now, consumers don't have much choice, says Chris Toledo, 45, a security consultant from Encinitas, Calif. "You're just going to pay it. I'm not going to jump on my bicycle," he says. But when the time comes for a new car, Toledo says hybrids will be on his short list. Roger Ruchti, 61, of Milwaukee, a manager for an electronic controls firm, says he will make a single trip to his favorite vacation spot 220 miles from home, instead of three or four a year. "I've already changed my driving habits," Ruchti says. This past weekend, he and wife Cathi carpooled with another couple to visit friends. They normally would have driven separately. While gas prices zap motorists, truckers face their own $3 fuel quandaries. Often less costly than gas, diesel nowadays can cost more. At the Truck Town truck stop in Fontana, Calif., in San Bernardino County, truckers lined up to pump diesel at $3.03 a gallon last week. Sedley Burdett, 58, of Rancho Cucamonga, Calif., said the 59 gallons he pumped for $182 should last about three days. Prices worry him. "If it keeps going up and up, I will be in trouble," he said. Long-haul trucker Bob Ploof, 40, of Petersburgh, N.Y., says that driving cross-country, he found diesel as cheap as $2.29 a gallon in Oklahoma. He knew fuel was pricey in California, "But I didn't think it was this high." Last year, Ploof says, he spent $40,000 on fuel. This year, it will be $50,000. The fuel surcharges that shippers imposed help a little, but not enough. "You can't afford to run, and you can't afford to shut down either." Not at $3.
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