By Brett Clanton
From the Houston Chronicle
Curtis Wyatt is an experienced butcher, but no matter how he slices it, he can't find a way to cut back on his driving, even as pump prices rise.
"We just keep putting money in and putting money in," said Wyatt, who with his wife relies on their Ford Explorer for work — a need that now costs the Houston couple $400 a month in gasoline.
U.S. drivers are feeling everything from resignation to rage after gasoline prices broke records and kept going last week. Commercial truck drivers also are anxious about diesel fuel prices that are hovering at all-time highs.
Fuel costs now take almost 4 cents of every dollar of Americans' take-home pay, the highest since 1983.
At the end of last week, regular gasoline sold for a record average of $3.28 a gallon nationwide, up from $2.97 just a month earlier, according to AAA's Daily Fuel Gauge Report. Diesel sold for a record $3.94, up from $3.38 a month ago, AAA said.
Prices were a little lower in Houston but still a record $3.17 for regular and $3.85 for diesel, AAA said.
The situation is likely to get worse before it gets better.
The national average price for unleaded gasoline could top $3.50 per gallon and hit $4 in some parts of the country by spring as runaway crude oil costs trickle down to the pump and demand rises ahead of the busy summer driving season, analysts said. Diesel fuel prices are expected to break the $4-a-gallon mark nationwide, forcing up prices of everything trucks carry.
As prices rise, consumers likely will make small changes to adapt — shopping at cheaper stores, eating out less, cutting non-essential trips, said Stephen Brown, director of energy economics at the Federal Reserve Bank of Dallas.
But fuel prices would have to remain high for a sustained period before most people would make major changes such as moving closer to work or buying more fuel-efficient cars, he said.
Fuel prices typically rise this time of year as Americans begin ramping up their gasoline usage with the improving weather and refineries shut down for routine maintenance. But the increase this year comes as crude oil prices, which account for roughly half the cost of gasoline, continue their march past $100 per barrel.
An average 3.8 percent of U.S. household income went to fuel in the fourth quarter of 2007, and the cut likely will surpass 4 percent in the first three months of this year, said Christian Weller, a senior fellow at the Center for American Progress, a nonprofit in Washington.
And consumers haven't yet felt the full brunt of oil's rapid ascent in recent weeks, said Lynn Westfall, chief economist at Tesoro Corp., a San Antonio-based oil refiner.
''If gas prices follow their normal pattern between now and June, and with crude at $100 a barrel, you'd expect to see about another 40 cents per gallon tacked onto today's gasoline price," he said.
''That's at a hundred. For every dollar that crude stays over $100, add another 2.5 cents.''
Gasoline prices broke the $3 mark for the first time in September 2005 after Hurricane Katrina took out Gulf Coast refineries and then again during the summer of 2006 before dropping back down. Last year, prices edged past the $3 barrier in the spring and once again late in the year.
The 2005 and 2006 spikes spurred Americans to make slight changes to their driving habits, said David Portalatin, director of industry analysis for the automotive division at the NPD Group, a Port Washington, N.Y.-based research firm.
But last year, when high prices were sustained longer, Americans drove fewer miles on a per-vehicle basis for the first time in more than two decades, he said.
The last time a similar pullback occurred was during the late 1970s and early 1980s, when the U.S. economy was in recession, he said.
Some experts read the sluggishness in gasoline demand, which has fallen every week since late January, the same way. They say it has more to do with the national economy than high gasoline prices.
"We're certainly starting to see the American consumer pinched," said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University in Dallas.
Weller said the burden of higher prices falls hardest on the working poor, who are seeing as much as 9 percent of their income go to fuel costs. In response, many consumers are being forced to cut back elsewhere as well as adding credit card debt, he said.
But things were worse in the early 1980s, when gasoline hit an inflation-adjusted record of $3.40 a gallon, said Brown, with the Federal Reserve.
Gasoline would have to be $5.50 nationwide to take the same bite out of Americans' income today, mainly because incomes have grown, he said.
But the bite's big enough now for Wyatt, the butcher, and his wife, a hospice nurse. And it's hard for them to budget their fuel costs precisely because their jobs take them to varying locations.
Other Houstonians also said they are keenly aware of high fuel prices, and are doing what they can to save.
For Tony Luciano, that meant trading his huge GMC Yukon sport utility vehicle last week for a Chrysler Crossfire, a two-seater coupe with double the gas mileage.
The 54-year-old Houstonian, who works in the shipping industry, said he would prefer to have a large vehicle, but grew tired of paying to keep the Yukon fueled up. "You have to adapt," he said.
Dan Willis, an independent truck driver from Splendora, is finding it harder to adjust to high diesel prices. Amid the recent run-up, his fuel costs have shot from about $250 to $475 per week, cutting sharply into his take-home pay.
"It's getting to be that you have to be really picky about the jobs you take," said Willis, 47, adding that if diesel hits $4.50 a gallon he will be forced to park his truck until the price falls.
The commercial trucking industry moves many of the consumer goods Americans buy, and those items could continue to jump in price as higher diesel prices are passed through to customers.
To avoid raising prices — and the risk of driving away customers — many retail chains and other businesses are scrambling to keep a lid on diesel expenses, said Rich Cilento, CEO of Fuel-Quest, a Houston firm that helps companies including Fed-Ex and Wal-Mart manage fuel costs. But it's getting harder.
The price of oil, and the fuels derived from it, no longer move up and down according to supply-and-demand fundamentals and seasonal patterns, he said.
Today, they respond to a list of "new norms," including global demand factors, geopolitical issues and perceived threats of new government regulation. In short, the rules of the game have changed.
"Now," he said, "we're sort of in uncharted waters."
