The U.S. crackdown against Russia and President Vladimir Putin over that country’s invasion of Ukraine has contributed to prices for gasoline reaching record highs.
Which begs a question: Will the price shock that consumers say they are experiencing at the gas pump prompt them to cut back – at least somewhat – on how many miles they drive?
Longtime experts on oil, economics and tourism contended in recent interviews that the price hikes won’t make much of a dent on trips taken by car or light truck, everyday passenger vehicle trips or commercial truck travel.
Consumers themselves are not so sure.
Some of them told Wyoming Business Report in recent weeks that they would curtail some passenger vehicle trips, particularly for leisure. One person said she had already eliminated all such trips for fun within our geographic region. And a newly released survey of Americans by the AAA motorists group found support for what WBR has heard anecdotally.
One thing that both experts and residents of Wyoming agree on is that, for much of their routine travel by automobile, they cannot easily cut back on driving close to where they live. What some are targeting for cutbacks to meet their personal budgets are less frequent trips that are a farther distance away.
Experts and motorists alike agreed that this will translate into limited impact on U.S. driving – for now. This is even though prices at the pump have been skyrocketing nationally, in Wyoming and in its capital city.
All who spoke with WBR conceded that drivers cannot easily, cheaply or quickly cut back on local trips by car and passenger truck. While it is easier for would-be vacationers to postpone their trips, drive shorter distances or take other modes of transportation, sticker shock at the pump also may not impact leisure travel for reasons unique to the coronavirus pandemic and the current booming economy.
Politicians say they are concerned about gas prices, which have surged since Russia invaded Ukraine. And drivers told WBR that they are closely watching these costs.
The good news for Wyoming, according to several experts, is that its No. 2 industry, tourism, likely won’t be much hurt by the price shock many drivers say they are experiencing at the pump. And Wyoming’s biggest industry, energy, also is not expected to face major supply or financial problems.
If the past is precedent, generally speaking, no expert who spoke with WBR in early March expected price shock at the pump to significantly curb travel.
With people eager to take vacations because of scaled back pandemic restrictions and lessened concerns over catching COVID-19, there is much demand to hit the road.
“We are at revenge travel” in terms of “kind of a new space” where consumers are determined to go on vacation and have new experiences, said one expert.
“We are going to see gasoline prices go up, and I think that’s going to push more people to cars” versus flying, said Christian Hardigree from Metropolitan State University of Denver, where she is the dean of the School of Hospitality.
Cheyenne, like Wyoming as a whole and Colorado, draws many tourists via automobile. They may opt to stay in less expensive hotels or even drive fewer miles on vacation, experts said. But they still likely will travel to places like Wyoming in pursuit of outdoor recreation and other activities.
This year still is expected to set records for the number of travelers to Cheyenne, said Domenic Bravo, CEO of the city’s convention and visitors bureau, Visit Cheyenne.
Wyoming has “great value-added” as a destination, and “a lot of our things are not super expensive,” Bravo said March 7. “I think you’ll see some ebbs and flows” in the extent to which people visit as gas prices gyrate.
“If the demand is there, I think folks are going to pay” the higher costs to travel, Bravo predicted.
At the Wyoming Office of Tourism, “right now it is too early to tell how or if gas prices will affect tourism throughout Wyoming, especially if prices fall as we get closer to the summer season.” That is according to a March 10 email to WBR from agency spokesperson Piper Singer Cunningham.
She noted that “historically, the price of gas has not impacted Americans’ willingness to invest in travel.” The office will “keep monitoring this as we progress through the spring,” she added.
The exception to this rosy outlook for vacationers is if surging gas prices results in U.S. inflation rising by such a high amount that it slows the overall economy.
At least during normal economic times, drivers show some dissonance with their price sensitivity to how much it costs to fill up their vehicle, said economist Robert Godby of the University of Wyoming.
“They will drive all across town” to find gas that is a few cents a gallon less, Godby said. “But they won’t change their behavior” involving the amount of fuel their vehicles actually burn, he added.
This is because it takes time and money to switch to an automobile with higher gas mileage (or even an electric vehicle). And especially in rural areas, it can be impractical to take other modes of transportation. Wyoming, with its spread-out rural communities and lack of major metropolitan areas, does not lend itself to transportation alternatives.
Business use of trucks and other vehicles also can’t quickly change, said Godby, who is interim dean of UW’s College of Business and an associate professor.
High gas prices are prompting Diamond L Trucking owner Luke Lundy to consider whether he should further raise prices he charges to construction companies for hauling things for them in his dump trucks. Even with no increase in what he charges likely on the near horizon, he still needs to use a few hundred gallons of diesel each week per truck.
It’s “definitely a lot different now feeling the pinch when your life revolves around turning diesel fuel into money” than in 2008, when prices also skyrocketed and he was not yet professionally driving, Lundy said. His family owned, second-generation company is based near Jackson.
Diesel prices have been on the rise recently, just like prices for regular and other grades of unleaded gasoline used in most cars.
In fact, gas information service GasBuddy said that on March 5, the average U.S. price for a gallon of diesel sold at retail “saw its largest single-day rise ever, spiking” 22.2 cents. That meant diesel cost on that day an average of $4.50 per gallon, Patrick De Haan, GasBuddy’s head of petroleum analysis, wrote in an email to WBR. By contrast, on that same day, the average for diesel in Cheyenne was $3.90 per gallon.
Also affected by the price hikes are gas stations themselves, and other companies in the supply chain that get oil to the pump. They must pay more to transport oil, such as via a tanker truck.
“It’s way more expensive for (gas) retailers and wholesalers to operate when the price is high,” said Grier Bailey, executive director of the Colorado Wyoming Petroleum Marketers Association. “And that’s why they like it when the price is going down,” just as consumers do, he added.
Financial circumstances like those at present most hurt gas stations within the energy industry, especially ones not part of bigger chains or diversified companies, Bailey said. “The retail guys kind of get kicked in the teeth the most, mostly because of the operational costs.”
Because Wyoming has sufficient refinery and other fuel capacity, with plenty of oil supply, Bailey, Godfrey and others don’t expect that the state will face any fuel shortages. It’s just that as prices for a barrel of oil sold on international and U.S. markets rises, so, too, will the cost of a gallon of gas.
Since the initial records were reached, the cost to fill up a car or truck has risen further, industry statistics show.
As of March 10, AAA reported that a gallon of regular unleaded gas would cost you $4.32 in the U.S., a record high. Diesel, too, was at an all-time record of $5.06 per gallon.
But in the Cowboy State, prices had risen, just not to record levels. Regular gas averaged $3.99 a gallon in Wyoming, versus $4.68 for diesel.
There may not be much variability in what it costs you go buy each gallon, even if you shop around. Gas stations “kind of self-regulate each other” when it comes to being competitively priced with rivals in the same geographic area, said AAA spokesperson Aldo Vazquez.
With the geopolitical situation far from certain, and a strong economy driving demand, gas prices may rise even further, many said.
“The longer that this war continues to go on, the more sanctions that are placed on Russia, if there is a ban on Russian oil imports, and if Russia decides to withhold its oil production from the global oil market,” Vazquez said, all this “will continue to elevate the cost of gasoline.” He was speaking a few days before U.S. President Joe Biden announced the ban on such imports, which, indeed, sent gas prices higher in Wyoming and nationwide.
A few days after the U.S. import ban was imposed on a wide range of energy products from Russia, AAA said that “Americans may have reached a tipping point.” It reported that 59% said in a Feb. 18-21 survey of 1,051 U.S. adults that “they would make changes to their driving habits or lifestyle if the cost of gas rose to $4 per gallon.”
The survey found that 52% of Americans have plans to vacation this summer: “Of those, 42% said they would not consider changing their travel plans, regardless of the price of gas.”
Prices are “going to go up more,” said David Ortiz, a 56-year-old Cheyenne resident, speaking several days before Biden’s import ban. The big companies drilling for oil and selling it into the wholesale markets “have to make every penny,” he said.
Ortiz understood that the Safeway gas station where he was interviewed needs to make some money selling gas. He and others said that although the grocery chain sells oil at a discount to frequent shoppers, the company still likely makes up for it with its food prices. (Safeway, like most other gas station operators WBR contacted, declined to comment or did not reply to queries.)
“You’re going to be buying groceries anyway” at the supermarket, where prices have been rising amid high inflation and other factors, said Maria Sanchez. “Whether you’re paying at the grocery store or here” for the cost of gas, the 56-year-old Cheyenne resident said, “you’re still paying.”
Sanchez said that if gas prices keep moving higher, it may affect whether she takes longer drives out of town or how many gallons she feels she can afford to purchase. “I am definitely going to have to watch my travel if it goes up” further.
One person who had already stopped traveling far from her home near Laramie was 66-year-old Kathie Till. She has curtailed trips to Cheyenne and Fort Collins, Colorado, Till said by phone March 8, hours after Biden’s announcement.
“I think people are going to have to cut back” because of prices, she said. “For me, I will cut back.”
Back at the Safeway in Cheyenne, motorist Marsh Bradberry was gassing up his pickup truck that he uses for his work as a plant grower. Because he travels so much for work, including across northern Colorado, he said he would keep buying gas, even if costs rise more.
“We’re on the road every day, and I fill this up every day,” Bradberry said. “I’ve gotta go. Even if it’s $5 a gallon, I’ve still gotta go.”