Gas consumption drops 1 percent

NEW YORK — Across the country, people already struggling with rising food prices, weak wage growth and falling home values are finding ways to manage the soaring cost of gasoline. They're combining errands, sharing rides, eliminating pleasure trips and using public transit more.

In fact, U.S. consumers caused a remarkable 1 percent drop in gas consumption the last eight-week-period over a year ago.

Gas use should be rising 1.5 percent annually just to keep up with the population, according to Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J.

The last time a drop that length was recorded was in early 1997.

As gas prices rose to $2 a gallon and $3 a gallon, Americans were expected to trade their sport-utility vehicles or drive less, but the strong economy kept pumps busy. When gas prices hit a record $3.23 a gallon last May, Americans shrugged it off as another temporary spike, but that was before the economy spiraled downward.

Sharply higher prices for food and other basic goods and weak home prices that limit the ability to cash out equity for spending money are wearing consumers down.

"In the past, their budgets weren't being attacked from all sides," said Joel Naroff, an economist and president of Naroff Economic Advisors in Holland, Pa. "People are adjusting not only to the rising price of gasoline, but now the soaring price of food."

Last November, demand in California plummeted by 3.7 percent as gas prices soared past $3.40 a gallon.

Part of the downturn came from low-income consumers staying home or taking public transport, but the sharp downturn in the state's economy played a part, said Chris Thornberg, a former UCLA economist who now runs his own forecasting firm, Beacon Economics, in Los Angeles.

The level at which gas prices force households to cut back is subjective and comes sooner to lower-income families. But there's evidence we're already at a point where average consumers are cutting nonessentials or "trading down" to cheaper brands.

Eventually, economists believe, this downturn in gasoline consumption will bring prices down.