New York » It’s Memorial Day weekend and our national obsession with the price of gasoline is in focus once again.
We’ll spend a little less at the pump than a few weeks ago, but that won’t stop us from muttering to ourselves, griping to friends and pointing fingers in many directions.
Our rants about gasoline and the oil industry may not always be based on facts, but one thing is undeniable: Americans are obsessed with the price of gasoline. More than any other good or service we buy.
In the language of economists, the price of gasoline is "salient." That means it sticks in our brains. Here’s why:
We’re reminded of the price every time we pass a gas station and see those huge, numbered signs. We buy gas every week, unlike bills we pay monthly or a couple times a year. Milk is $4 a gallon, but we buy only one. When we fill up with gas, we spend $50 or more.
And the biggest frustration, which comes into focus as the numbers spin ever higher at the pump: There is no alternative.
"The oil companies have cornered the market and they are squeezing us for everything we have," says Bob Simpson, 62, of Lodi, N.J., who pays close to $60 to fill up his Ford Escape.
Cheap gas makes the wide open spaces of America seem full of possibility and adventure. When it’s expensive, we think twice before setting out.
"Driving is a symbol of freedom in the U.S.," says Shanjun Li, an economist who studies consumer behavior at Cornell University’s Dyson School of Applied Economics.
At a nationwide average Friday of $3.67 per gallon, gasoline is far cheaper in the U.S. than much of the rest of the world, thanks to relatively low taxes. In Japan, gas costs more than $7 a gallon; in Britain, nearly $9. Yet Americans consider cheap gas a birthright, so it’s a shock when factors beyond our control drive up the price.
People understand why a big TV costs more than a small one, or why tickets to a playoff game are more expensive than a regular season game. But it’s harder to appreciate why a local gas station charges more because of high oil demand in China or a remark by an official in Iran. It must be, we reason, that someone is taking advantage of us.
It’s not the case, of course: The market for oil and gasoline is global, so rising demand anywhere can push up prices everywhere. And world oil demand is forecast to rise to a record this year.
Also, oil and gasoline are priced on financial exchanges, not by oil companies. Investors can buy oil and gasoline futures contracts — and push up prices — if they fear supplies could be disrupted in the future. But they also can bet that prices will go down.
When President Barack Obama promised stricter oversight of oil markets and a crackdown on "speculators" last month, he stopped short of saying market manipulation was responsible for the current high prices.
Still, the market forces just don’t feel right. "People like the idea of a free-market economy but they don’t like feeling abused. The fluctuations in the gas prices make people believe this is not an outcome of a free market," says Daniel Airely, a professor of Behavioral Economics at Duke University and author of the book "Predictably Irrational."
Of course, dramatic price rises are common to many markets. The difference with gasoline, and a big part of the reason we are obsessed, is that people who need to get to work or want to visit family may have no choice but to drive.
When broccoli is expensive, we can buy asparagus instead. If flights to Paris are expensive in July, we can wait until November. Or visit Seattle instead.
"We are powerless," says Dave Bartiromo, 39, an internet marketing specialist from Wadsworth, Ohio. "I can get by just fine without orange juice if it’s expensive. Gas is my only option."
U.S. motorists spend far more than any other country at the pump — $470 billion last year. A typical family spends 8 percent of its household income on gasoline, according to the Oil Price Information Service.
That weighs on the mood of Americans. When prices are high, we worry about spending on other goods and our financial situation in general.
Still, the concern over gasoline prices "is completely out of proportion with the financial damage it does," says Amy Myers Jaffe, director of the Baker Institute Energy Forum at Rice University.Next Page >
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