Stubbornly high gas prices causing some motorists to cut back on other things

Stubbornly high gas prices causing some motorists to cut back on other things

When Bill Hamilton and his wife vacationed at the Maryland shore last month, the couple fixed sandwiches instead of eating lunch in a restaurant. And when it came to a seafood dinner, a highlight of the Springettsbury Township couple’s annual trip, they opted for a less pricey restaurant.

“We watched what we spent,” Hamilton said.

A painter at Lancaster General Hospital, Hamilton, 48, has a 56-mile round-trip commute that eats up more than 10 gallons of gas each week.

While gas prices have fallen in recent weeks, the price of a gallon of unleaded in the York area was selling for an average of $3.69 on Wednesday — 37 cents more than a year ago. That has some York County residents trimming what they spend on other things like vacations, shopping and dining out.

Statewide, gas prices in Pennsylvania are up 30.7 cents from a year ago, the largest increase of any state, said Tom Kloza, chief oil analyst for in Wall, N.J.

Some people have dealt with high gas prices by buying more fuel efficient cars. But for those who haven’t, “one incontrovertible fact” is that when gas prices rise, they leave consumers with less money to spend on other things, said Kurt Rankin, an economist with PNC Financial Services Group.

Crude oil prices are $5 to $10 a barrel higher than last year because of unrest in the Middle East.

And in Pennsylvania, lawmakers hiked the tax on gasoline at the wholesale level by 9.5 cents starting Jan. 1. It was the first of three tax hikes — others are slated for 2015 and 2017 — that will raise the price at the pump by a total of more than 25 cents a gallon if retailers pass along the full increase to consumers. The increased tax revenue will be used to repair Pennsylvania’s crumbling roads and bridges.

Higher gas prices can slow an economic recovery because consumer spending accounts for about 70 percent of U.S. economic activity. Demand for gas is “inelastic,” said Ken Slaysman, an associate professor of economics at York College. That means motorists have only a limited ability to cut back on their driving — or on rent and groceries. So they reduce discretionary purchases instead.

“You don’t go to as many movies,” Slaysman said. “You don’t go to as many ballgames.”

Or shop as much.

Bon-Ton Stores’ CEO Brendan Hoffman pointed to higher gas prices as one factor that contributed to the retailer’s 6.4 percent drop in same-store sales in the second quarter of 2013, which ended Aug. 3. Gas prices eased later in the year, and Hoffman noted in November that lower gas prices helped the retailer’s sales improve in the third quarter.

But gas prices have risen this year. For Gregory Orr, a sanitation worker who lives in York, the higher prices mean buying fewer clothes.

“The shopping trips are less and the bags are less full,” said Orr, 37, as he bought $10 worth of premium gas at $4.05 a gallon at the Tom’s Exxon station across from York Hospital.

“You cut back where you can,” he said. “You make it work. You do what you have to do.”

While retail sales for the first five month of 2014 have risen 2.7 percent from last year — which is below the 4.1 percent increase for 2014 the National Retail Federation forecast earlier this year — sales growth has accelerated in recent months.

Retail sales rose 3 percent in May and 5.4 percent in April, said Jack Kleinhenz, NRF’s chief economist.

Better news for motorists could also be on the horizon.

Kloza, of, said prices may fall as much as 20 cents to 25 cents a gallon by early December as motorists cut back on driving after Labor Day.

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