Gas prices hurt budgets
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Friday, June 15, 2007 | 
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No Comments [ Add Comment ]By Jeff DeMoss
Standard-Examiner staff
jdemoss@standard.net
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By Jeff DeMoss
Standard-Examiner staff
jdemoss@standard.net
SALT LAKE CITY -- Five days a week, Jeremy Kaspar drives about 25 miles each way from his home in Layton to his job as a warehouse supervisor in Salt Lake City.
With local gasoline prices hovering near record highs, Kaspar, 33, longs for the days when he will be able to hop on commuter rail and leave his Jeep Cherokee in the garage.
"I'm spending way too much on filling up this thing," he said at a Centerville gas station Thursday. "It's eating up all my fun money."
Surging gasoline prices haven't changed Utahns' buying or driving habits yet, but they will soon if prices remain at current levels, a leading economist in the state predicted at a Thursday presentation.
"If we stay at $3.20 (per gallon), the impact will definitely be significant enough to be noticed," said Kelly Matthews, executive vice president and economist for Wells Fargo in Salt Lake City.
"I can't say exactly when or at what level, but we will see an impact on consumers' spending habits and driving habits."
Utah households that file "married-joint" tax returns spent an average of 5.3 percent of total household income on gasoline in May this year, up from 3.3 percent in May 2000, according to a new analysis by Matthews.
"Most people just don't have enough slack in their budgets to absorb that kind of increase," he said.
Matthews' analysis suggests that current gas prices, when adjusted for inflation, are nearly what they were in 1981, which is still considered the most expensive year historically for American motorists.
Improvements in fuel economy have helped reduce drivers' costs per mile since 1981, when gas prices consumed an estimated 8.1 percent of household income.
But gasoline costs as a slice of the average budgetary pie have been growing steadily since 2000, and drivers are getting less bang for their buck at the pump.
Matthews said that spending 5 percent of total income would currently buy the average Utah household 1,406 gallons of gasoline, down from 2,264 gallons in 2000 -- a decline of nearly 38 percent in purchasing power.
And that's after accounting for his projection that Utah joint household incomes rose 10 percent on average in 2006 and will rise 8.5 percent this year, estimates that he called "aggressive."
"We can't ignore the impact of that on budgets, or on spending and driving habits," he said.
Sterling Jenson, regional managing director for Wells Capital Management, said high fuel prices could be significant enough to affect national economic policy later this year.
The Federal Reserve raised its federal funds rate -- the rate at which banks borrow from each other -- 17 times from June 2004 to June 2006 to combat inflation, but has left it unchanged at 5.25 percent since then. There has even been talk of rate decreases this year to restore some fire to the economy.
But with high fuel prices threatening to slow further growth, "maybe there will be no rate decreases this year, and we might even see rates increase again," Jenson said.
Average per-gallon prices for regular gasoline in the Ogden-Salt Lake City area have eased down 3 cents after hitting a record high of $3.22 on June 1, according to AAA.
If the past two years are any indication, prices will remain mostly flat throughout the summer and could easily hit new highs in August.
"The recent trend has been that we don't see much price movement during the summer, at least until the later part," said AAA Utah spokeswoman Rolayne Fairclough.
"If anything, we'll probably see increases leading up to Labor Day."
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