News From Terre Haute, Indiana

Mark Bennett Opinion

April 24, 2011

Mark Bennett: Consumers stuck when it comes to dealing with increasing gas prices

TERRE HAUTE — Most motorists pulling up to the gas pumps lately can relate to Frank Costanza.

As George Costanza’s volatile father on “Seinfeld,” Frank was told to say, “Serenity now,” whenever he felt his blood pressure rise. Instead, Frank screamed the phrase, defeating the purpose and illustrating his perpetual state of agitation.

Some folks possess the tranquility to see “$3.99” on a filling station marquee and gently sigh, “Serenity now.” Others would bark it like Sam Kinison.

Actually, we’re better off reciting the “Serenity Prayer,” which says, “God, grant me the serenity to accept the things I cannot change; the courage to change the things I can; and the wisdom to know the difference.” If we’re realistic, we understand the price of gasoline is something a single consumer simply cannot change. Neither can the federal government, at least not significantly in the near future.

“There’s no short-run policy on that, that will have any impact at all,” said Don Fullerton, who teaches finance at the University of Illinois at Urbana-Champaign and served as deputy assistant secretary of the U.S. Treasury Department under President Reagan.

Whether gas costs less than $2 a gallon (as it did in December 2008) or $3.99 (as it did Thursday at some stations in Terre Haute), “We just have to live with the circumstance,” said Michael Hicks, director of the Center for Business and Economic Research at Ball State University in Muncie.

Live with it. … Go ahead, Frank, scream your guts out.

Why are we stuck on this Costanza-ish, blood-pressurized rollercoaster, when it comes to the cost of gasoline? When the rollercoaster (or fuel price) races downward, we go wild, throw our arms up and march into a dealership to buy a hefty SUV or truck. Other factors — like the development of alternative fuels, the uncertainty of relying on unstable Middle Eastern nations for oil, wars over petroleum, the distance between our house and our workplace, and the expansion of mass transit — are out of sight and out of mind.

Until, of course, the inevitable moment when the rollercoaster (or fuel price) goes back up, along with our blood pressure. With a white-knuckled grip, we start questioning why we’re on this ride in the first place. In the land of free enterprise, we wonder how oil companies can reap obscene profits while the rest of America struggles; we suspect conspiracies, and demand congressional investigations.

Then the rollercoaster clears the peak, prices go down, we feel a surge of satisfaction, and all of that long-run stuff is forgotten. Again.

We’re riding uphill right now. The average cost of a gallon of regular unleaded in Terre Haute has ascended to $3.88 last week from $2.81 a year ago, according to AAA. Some energy industry analysts — including those quoted in a USA Today story last week — predict pump prices will top records set in the grueling summer of 2008, when the average price hit an all-time high of $4.18 in Terre Haute. Some prognosticators think gasoline could surpass the $5- or even $6-a-gallon level before autumn.

“That’s very irresponsible for anybody to throw out prices like that,” said Greg Seiter, public affairs manager for AAA Hoosier Motor Club in Indianapolis. “There isn’t a person on the face of the planet that can accurately predict the prices of gasoline.”

Gas prices have more ingredients than gumbo. Speculation that fuel prices will rise frequently contributes to an increase. So could military action in an oil-producing country, or a disruption at a refinery, a pipeline fire, or hurricanes, Seiter explained. Likewise, if the citizen uprisings in countries such as Libya, Egypt and Syria resulted in new democratic governments, prices could drop drastically, Hicks said, though those downward influences could be offset by the growing demand for fuel in China and India — where a combined 2.5 billion people live and an increasing number of them are driving their own vehicles. And, obviously, worldwide oil companies supremely maximize profits through each twist and turn.

Like it or not, “this is a global market,” Hicks said.

In moments of soaring prices, the political tide flows toward outrage and quick fixes. Those remedies include tapping into the U.S. Strategic Petroleum Reserve, a 34-day federal stash intended for emergencies, or suspending the federal gas tax (around 18 cents per gallon). Neither would dent the price of gasoline much in America, said Fullerton.

Actually, when inflation is calculated, the federal gas tax is lower — in terms of real prices — than it was a half-century ago, Fullerton said.

It’s tempting to reminisce about the days of sub-dollar gas prices (for folks old enough to remember), but Fullerton suggests a reality check. The actual price of a gallon of gas in 1960 was 25 cents, but the “real” (or inflation-adjusted) price was $2.33 a gallon. The federal gas tax of 4 cents, then, calculates to 29 cents today, well above the current 18-cent mark. The average price of gasoline in 2009 was $2.42, just 9 cents higher than the inflation-adjusted 1960 price, Fullerton pointed out.

The current surge toward $4 could be temporary, just as it was in 2008, when it plunged to less than $2 in December from $4.18 in July. The economic recovery in Indiana could be slowed by $4-a-gallon-or-higher gas, Hicks said. Hoosiers may change their consumption habits in the short term, cut back on discretionary spending, curtail summer travel plans, and, maybe, purchase a more full-efficient vehicle if they happen to be looking at that moment.

For long-run changes in our behavior, gas prices would have to stay high for a longer period, Fullerton said. At that point, house shoppers or job hunters might choose to live and work in closer proximity. Carpooling or taking the bus could become more appealing. Public officials might get serious about light rail development.

In the meantime, we’ll keep trying to scream our way into serenity.

Mark Bennett can be reached at (812) 231-4377 or mark.bennett@tribstar.com.

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