The Ukraine Crisis: Consumers Ease Up on Drive Time

"Americans are rethinking their driving and spending habits as gasoline prices surge to record highs.

The average price of regular unleaded gas in the U.S. reached $4.252 a gallon Wednesday, according to AAA, after earlier this week breaking the previous record from July 2008. In California, the average price hit $5.573 a gallon, which is also a record.

Tripp Harris, a 26-year-old Ph.D. student at Indiana University Bloomington, worked as a part-time driver for Uber Technologies Inc. for the past five years. He made a few hundred dollars in supplemental weekly income -- until the past couple of weeks, when he stopped. "I can't afford to drive Uber anymore," he said, as gasoline prices in his area are about $4.25 a gallon.

Mr. Harris said his reduced income has prompted him to cut back on his own discretionary spending. "I've been more intentional about going out to eat and things like that," he said.

Uber said drivers' earnings remain elevated compared with the company's historical trends. "We'll continue to monitor gas prices and listen to drivers over the coming weeks," said an Uber spokesman.

The rapid rise in gasoline prices comes as the U.S. is recovering from the economic shock of the Covid-19 pandemic. The price increase threatens to eat into consumer spending as the cost of other goods also continues to rise. Economists and analysts said the rise in gas prices will force some people to cut back on driving or put off vacations.

Gas prices in the U.S. had been creeping up in recent weeks, even before sanctions on Russia.

More drivers had been returning to the roads as Covid-19 restrictions eased, but the nation's capacity to refine gasoline remained below pre-pandemic levels, creating a choke on supply when demand was on the rise.

Sanctions on Russia caused another supply. Oil prices rose again Tuesday after the Biden administration announced a ban on imports of Russian crude oil, certain petroleum products, liquefied natural gas and coal.

President Biden acknowledged that banning Russian crude oil would result in higher gasoline prices in the U.S. He said the administration's previously announced move to release 30 million barrels of oil from the government's reserves would help blunt the price increases at the pump. "I'm going to do everything I can to minimize sanctions’ on Russia price hike here at home," he said.

Not only have average gasoline prices reached records, the pace of the increase has been staggering, said Patrick De Haan, head of petroleum analysis at price tracker GasBuddy.

The average price of regular unleaded gasoline rose 55.4 cents a gallon Tuesday compared with the previous week, according to AAA. The price was 15% higher than a week earlier and 21% higher than a month earlier, the automobile association's figures showed.

"It's been astounding for motorists to wake up and see the station nearly 60 cents higher than just a week ago," Mr. De Haan said. "Some community stations are up 80 cents, even a dollar a gallon. It's just astronomical."

Beth Ann Bovino, chief U.S. economist for S&P Global Inc., said higher prices at the pump could result in less spending on other items and will affect lower-income households the most because they have less money and fewer options for cutting back on expenses.

"It's going to crimp household purchasing power dramatically," Ms. Bovino said. "People won't feel wealthy enough to buy that expensive steak, so they'll go for cheaper options."

Some households will try to finish several errands in just one car trip, she said. Families may change vacation destinations to somewhere closer to home, or rethink those plans altogether, she added.

Mr. De Haan said the sticker shock at the pump might not put an immediate dent in fuel demand with more pandemic-weary Americans anxious to travel and get out. But with gasoline prices expected to continue rising amid sanctions continuing, the higher cost of fuel will soon begin to take its toll, he said.

"For a lot of these folks, they may still be living check to check," Mr. De Haan said. "In two months' time, they will start to feel the pain."

David Gifford drives five days a week to work at an automotive-interior-parts manufacturer in metro Detroit, about 20 miles from his home. He most recently filled his gas tank for $4 a gallon.

"To add another $60 a week to our gas tanks suddenly starts eating into other things," he said.

If gasoline prices continue to climb, Mr. Gifford said he would consider taking buses to work rather than driving, despite a bus commute taking about two hours each way, compared with about 30 minutes by car.

"If I had to add on extra hours of commuting to my day, that would be a big loss for family time," he said." [1]

1. The Ukraine Crisis: Consumers Ease Up on Drive Time
De Avila, Joseph; Abdel-Baqui, Omar.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 10 Mar 2022: A.13.