Sunday, February 24, 2008

You can't spend it if you don't have it

There was an article in the Boston Globe today about Gas costs forcing drivers to cut back.

"Until then, Stone said, she hadn't thought much about gas prices or filling the tank of her Acura, which she did a least twice a week. Now Stone, 55, a teacher, limits hergas budget to one fill-up or no more than $25 a week. She carefully plans her travel, sticking to the shortest route and avoiding spur-of-the-moment side trips.

When she fills a prescription, she shops for food at a supermarket around the corner. Other times, rather than driving across town, she walks to the small grocery store near her home. When she needed light bulbs and other items recently, she stopped at a hardware store along her route and spent a little more, rather than driving farther to a supermarket where prices were lower."

In just a matter of weeks, not only has Ms. Stone got her household budget under control, she has also halved her CO2 emissions. If everyone in America followed her example, we would reduce US CO2 emissions by a whopping 10% ! This month. We would also reduce the trade deficit, dramatically improve our “energy security,” and eliminate the endless debate over drilling in the Alaska Wildlife Refuge.

What I found interesting in the article was that there was no talk about how cutting back had required difficult sacrifice. Rather, those interviewed talked about adjusting their habits to take efficient travel into account.

"Towle, 44, now limits herself to one fill-up a week. She puts off buying more milk until she needs a bigger shopping trip. She used to drop her 13-year-old daughter off at basketball practice, make the 15-minute drive back home, then return to pick her up at the end of the 90-minute session. Now, she waits at the school."

Ridesharing, going loco, is another tool for the adjustment, and a pleasant one at that. I know my 14-year-old finds the carpool to and from her rock-climbing practices a valued part of her social life.

According to US Department of Energy numbers, the last four weeks have shown a flattening and a decline (depending on the location) in demand for gas, the first time in many years. The Globe article attributes these recent reductions to consumer realization that these high prices are here to stay, and so they need to adjust.

I think there is a different reason. Very high prices in home heating fuels drained low income Americans of their cash reserves. This happened in the fall. With Christmas, we saw credit card nonpayment surging. MacDonalds also saw a decline in revenues throughout the fall. With their credit pushed to the limits by heating needs and Christmas, and luxuries like eating-out reduced, petrol has finally risen to the top of the discretionary spending list for many Americans.

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