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Will cheap gas mean return to gas-guzzling ways?

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SANDY SHORE
October 11, 2008
— Prices at the pump are dropping fast, and gas could fall below $3 a gallon in a matter of weeks, if not sooner. Does that mean Americans will return to their heedless, gas-guzzling ways?

Experts say no because most drivers assume the dip in prices will be short-lived, and motorists have adjusted their habits accordingly.


"We've been through almost eight years of continuously rising gasoline prices," AAA spokesman Geoff Sundstrom said. "Any notion that this is a temporary thing has pretty well been erased."


New technologies are emerging fast, with electric cars expected to hit the market in a couple years. But the question is no longer when gas prices will fall, but when will the next spike come?


"Everywhere you go, be it the store, the diner, whatever, you hear people talking about their gas costs and how they need to cut back, said David Robinson, 67, while a friend filled up in Lakewood, N.J. "You still hear it, even though gas keeps dropping."


Even automakers that have long relied on big trucks for profits are moving in a new direction.


Ford Motor Co. is changing from a truck to a car company in North America. General Motors Corp. is closing four factories that make pickup trucks and sport utility vehicles. It will also open a new plant to make four-cylinder engines for the Chevrolet Volt electric car and Chevrolet Cruze compact.


The shift in consumer behavior was noted by AAA in December, when vehicle miles traveled began to slip. Regular gasoline had just risen above $3 a gallon during a month when gas prices usually fall.


By July, regular unleaded gasoline set a record national average of $4.11 a gallon.


The slackening demand for fuel is backed up by industry analysts, who say there has not been such a drastic shift in driving behavior in decades. Demand for gasoline dropped 6 percent over a couple months.


"For most of this decade, we've seen uncertainty manifest itself in the oil markets" in terms of supply," said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J. "This is probably the most depressive period" consumers have seen in a generation.


Gas prices fell again Friday to a national average of $3.35.


Prices dipped below $3 a gallon on average in Kansas, Missouri and Oklahoma. If crude keeps falling, the rest of country should see gasoline selling for less than $3 in the next few weeks or sooner, experts say.


In the Denver suburb of Wheat Ridge, Clarke Soule paid $3.31 a gallon to fill his Lincoln Navigator. The self-described ultra-conservative blames the high prices on drilling bans on the outer continental shelf and in Alaska's Arctic National Wildlife Refuge.


"I worked 47 years for AT&T, and when I want to buy something, I buy it," said Soule, 65.


For many Americans, the big car is too ingrained as a way of life to let go, said Kit Yarrow, a Golden Gate University psychologist who researches the effects of oil prices on consumer behavior.


"Driving is just so central to their lives, their feelings of freedom and so on, that they're to going to do what they're going to do," she said.


But for most other drivers, that way of thinking has been abandoned.


"People kind of understand now what their foot on the pedal means in terms of money," she said.


Bob Gomez, a state employee in Colorado, has begun to car pool.


In Los Angeles, artist Shahla Kareen gave up her 2007 BMW 530i sedan in July for a 1978 Mercedes fueled with waste vegetable oil. She pays $1 a gallon.


"I would spend $75 to $100 to fill up my tank per week with the BMW," Kareen said. "Now I spend maybe $20 a week."


There have been broad changes across entire industries as well.


Cruise lines have altered routes to save fuel. UPS Inc. and the U.S. Postal Service are turning to alternative-fuel vehicles, and UPS plans to use biodiesel at its Kentucky air hub. Airlines are shifting to more fuel-efficient planes.


Industry analysts say gas could fall as low as $2.50 to $2.75 a gallon, but many see that as a temporary pause before prices rise again.


Analyst Stephen Schork said that any return to more liberal use of fuel would occur a long time from now because consumers are already making big-ticket decisions about what cars they will drive.


In September, consumers continued shifting from trucks and SUVs to cars, with car sales representing 52 percent of the market. Sales of Ford's top-selling F-series pickup trucks fell 42 percent.


David Portalatin, an automotive industry analyst for the NPD Group, said research has shown both short-term and long-term behavior changes that will continue for an extended period regardless of the gas price.


"Consumers don't have a lot of faith that the price will come down and will stay there for very long," he said. "Today's consumer is more thoughtful about overall finances."


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Associated Press writers Don Mitchell in Denver, Solvej Schou in Los Angeles and Ben Leubsdorf in Detroit contributed to this report.



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