What, Us Give Up Gasoline?

Source: USA Today
[May 22, 2006]

Americans are unlikely to slice their gasoline use despite high fuel prices — a striking notion viewed against the current clamor for fuel-efficient cars, the buzz about alternatives to gasoline and the anger about sending our petro dollars to hostile but oil-rich countries.

Many factors play into America's reluctance to conserve, but two facts of human behavior dominate, psychologists say: We get used to high prices that are reached incrementally. And we're more afraid of losing something than we are motivated by the advantages of giving it up.

Combined with surveys showing that our interest in fuel efficiency rises and falls with gasoline prices instead of being an ever-increasing concern, it's reasonable to say that the USA won't slow its fuel use, at least not for a long time.

“In many ways, this is an insurmountable problem. There is no simple solution to get people to change their driving,” says Nick Epley, psychologist and assistant professor of behavioral science at the University of Chicago Graduate School of Business.

“People adapt to all states of affairs, positive and negative, and more quickly than they think,” he says. “If gas were to go up from $2 a gallon to $3 overnight, we'd be up in arms. But it goes up a couple of cents each time you go to the pumps, and pretty soon it's $3 and, ‘Yeah, that's what gas costs.'

“And conservation of any kind is tough for people to take. It requires losing something, cutting out part of their lifestyles,” he says.

That's called “loss aversion,” and it's hard to overestimate its influence, says David Dunning, psychology professor at Cornell University and executive officer of the Society for Personality and Social Psychology. “In making judgments, losses loom much greater than gains.”

You'd get an “amen” from Don Nowacki. “I don't think (expensive fuel) is going to change a person's way of living, at least not ours,” says Nowacki, 70, a retired county worker. He was preparing to drive his 10-mpg Coachman motor home back to South Dakota from Huntington Beach, Calif., and has no intention of giving it up even though he's anticipating $4 gas.

The last time America embraced energy conservation was in response to the 1970s energy shortages. People fiddled with thermostats, insulated attics, unscrewed every other light bulb, even cut back on Christmas lights.

Most significant, they shunned Detroit's hefty, fuel-thirsty buggies for Japan's small fuel-sippers.

Now, fuel prices are close to what they were then, relatively speaking. Shortages are popping up. The president says we're addicted to oil and must change. Energy alternatives are hot topics. You'd think that would be enough to imprint the mantra “conserve” on the national conscious. There is evidence of fuel-saving:

•Gas-sipping cars are selling well. Automakers and dealers report shortages of gasoline-electric hybrids, as well as the Toyota Yaris and Honda Fit, recently introduced subcompacts that claim 30-plus miles per gallon around town.

•Public transport ridership has risen.

•Gasoline consumption is off a little from a year ago.

But even what seem like bright signs can be read darkly.

It only “shows how unresponsive drivers are, when you think how high prices had to rise to get people to change their behavior just a little bit,” says Stephen Brown, director of energy economics at the Federal Reserve Bank of Dallas.

Gasoline prices have been fluctuating around $2.90 a gallon for regular. The AAA average was $2.933 Monday, up from $2.902 a day earlier. The government's Energy Information Administration said Monday its average was $2.947, up 3.8 cents from a week earlier.

If prices drift down, conservation will be overrun by consumption, say people who study the patterns. “The lower the price, the less the interest in conservation,” says Jim Hossack, analyst at researcher and consultancy AutoPacific. But the reverse isn't always true: that today's high prices encourage fuel-saving behavior, such as driving more slowly. “I drove in to work doing 75 (mph) in a 65 zone, and people were passing me like there was no tomorrow. Incredible. I'm doing 10 over, and I'm holding up traffic” on a Southern California highway.

“Americans tend to want to buy the biggest, most comfortable vehicles they can afford — and always have,” says Jack Nerad, 25-year veteran of auto and trade publications, including a stint as editor of Motor Trend magazine. He's currently executive editorial director and auto-price analyst for auto researcher Kelley Blue Book.

No argument on the big and comfortable thesis from Margaret Mitchell of Glendale, Md. “My first love is the SUV,” she says, undeterred as the pump hits $63 filling her V-8-powered Lincoln Aviator midsize SUV in Arlington, Va.

“It's just easy with kids. You can throw everything in there,” says the human resources manager. Mitchell, 44, drives about 60 miles a day from her home to her two kids' school, then to work and back. In addition to the convenience, she's also reluctant to give up the SUV's “power and the height.”

Power is also the issue for Howard Sucher, 36, an advertising executive living in Parkland, Fla. He traded his Chrysler 300C, powered by a 340-horsepower Hemi V-8, a few weeks ago for a $63,000 Cadillac Escalade SUV with a 403-hp V-8, “just because I'm used to something that has strong horsepower.” It gets 13 to 16 miles per gallon, which he says is fine. He loves the truck and is considering getting one for his wife to replace her Chevrolet Suburban SUV.

What about the European example, where small cars and fuel-saving diesel engines are the norm?

Roads there are narrower, so fuel-thirsty, American-size vehicles won't fit some places and aren't on wish lists of even those who could afford to buy and fuel them.

And high gasoline prices discourage consumption. Average gasoline prices range from the equivalent of $6.32 a gallon in France to $7.07 in the Netherlands, according to a survey earlier this month by EIA.

“I think I would conserve at that price,” says Cornell's Dunning.

What's more, he says, “alternatives for transportation are just more available in Europe. Last summer, when I was in Germany, I did not need a car. I could walk 10 minutes to a train station at a time convenient for me and pretty much be taken to whichever city I wanted to go. Once there, I could take a tram or bus to any neighborhood. I thoroughly enjoyed not needing a car.”

Fuel prices have been high for so long in Europe that people there “have never acquired the lifestyle habits — for example, muscle cars — that we would have to give up in order to conserve. Thus, no ‘loss aversion' for them,” Dunning says.

Europeans assume the conservation ethic is correct and universal, and are shocked both by Americans' definition of $3 gasoline as expensive, and by fuel-thirsty vehicles. U.S. gas-guzzlers “are ridiculous,” says Peter Salakov, 25, a German working and attending graduate school in the Washington, D.C., area. “People need to find a more efficient way.”

In addition to our ability to adapt to high prices that are reached incrementally, and the influence of loss aversion, there are other barricades to fuel conservation:

•Finances. Most people can't afford to dump current vehicles and replace them with small cars, gasoline-electric hybrids, diesel-power vehicles or others that use less fuel.

If the current vehicle is an obvious gas hog, it probably won't bring a high price or have a hefty trade-in value. On the other hand, fuel-sippers have been selling for premiums lately because supplies are low and demand is strong.

The value of a 3-year-old compact, such as a Toyota Corolla or Honda Civic, has jumped to 49% of its new price from a nadir of 40% in 2004, says Automotive Lease Guide. Full-size SUVs have moved opposite, ALG says. After a peak of 53% in '04, a 3-year-old SUV today is worth 44% of its new price.

Supplies of new small cars might never be robust, because dealers and automakers often don't make much on them. A Toyota dealer gets about $500 selling a Yaris at window-sticker price, for example, but has a profit margin of about $1,700 on a four-cylinder Camry LE. There also are more high-profit options and accessories available for a mainstream car such as the Camry.

•Size. Good intentions notwithstanding, some fuel-saving models simply aren't big enough.

“If you have seven kids, or four kids and they go to Little League games, you've got to buy an SUV,” says Toyota's U.S. President, Jim Press. “It's the same with a full-size truck. It's a product for work. Contractors can't put all their cement tools in the back of a Corolla.”

•Lifestyle. Saving a few hundred dollars a year on fuel, even $1,000 or more, won't justify selling your home 50 miles from work for whatever you can get, then likely going deeper into mortgage debt for a house close to the office.

“People have organized their lives in a particular way; where they work, what their children are doing. All those things are difficult to change,” says Brown at the Dallas Federal Reserve Bank.

Hopeless? Not quite.

“Although behavior can't change all that much in the short term, people do change their behavior in the long term as the opportunity to do so arises,” Dunning says. People might choose a more fuel-efficient vehicle next time, he says, or automakers might have improved the fuel efficiency of all models.

But waiting for millions of Americans to buy new cars and trucks is a slow process, and whether choices result in conservation depends on how painful the memory is of high prices and spot shortages.

Studies show that interest in small cars is “directly linked to the current price of fuel and what they think the price will be in the future,” and doesn't reflect any long-term commitment to conservation, says AutoPacific's Hossack.

“That's America's problem,” he says. “Our national policy is one of ‘Abundant, cheap energy for all — but please don't use it.' Why would we conserve?”