Gas Price Update

by Erik Knoder

May 24, 2018

Gas prices have crept up about 12 percent over the past year and are starting to get more attention now that they are above the $3 per gallon mark for most consumers. Higher prices for gasoline can affect the economy of Northwest Oregon in several ways: high gas prices can discourage visitors, increase the cost of commuting to work, raise the cost of goods that are shipped into our region, and compete with consumer spending on other goods or services. (Note: West Coast gas price data are not available from 2001 to 2004.)

Northwest Oregon had about 13,500,000 overnight visitors in 2017. Lincoln and Clatsop counties were the top destinations. All visitors combined spent $1.5 billion at businesses in Northwest Oregon in 2017. Travel and spending may be more at risk this summer if some recent news stories are correct. GasBuddy conducted a 2018 Summer Travel survey and reported that 58 percent of Americans planned a road trip this summer, down 24 percent from 2017, and 39 percent cited higher gas prices as a reason for changing their plans.
Demand for gas for commuting to work and freight transportation is considerably more inelastic than for vacations. A 2008 study by the Federal Highway Administration reported that a 38 percent increase in the price of gas from July 2007 to July 2008 led to a drop of only 3.6 percent in vehicle miles traveled. In the short run, commuters and truckers have fewer options when faced with high prices at the pump.

One way high gas prices affect consumer spending is by changing preferences for vehicle ownership. SUVs and crossovers increased their market share from 2014 to 2016 as the economy recovered and gas prices remained low. When gas prices rose in 2008, people switched to purchasing smaller fuel-efficient sedans. Consumers also tend to cut back on discretionary spending, such as meals out and shopping at malls, when gas prices rise.

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