$3 gas is back -- and car buyers are noticing
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Nothing takes the TG out of TGIF quite like pulling into your neighborhood gas station and seeing the dreaded “3” on the price board.
Yes, $3-a-gallon gas is back in Southern California. And a study released today by Kelley Blue Book indicates that it’s starting to affect car shoppers.
As of today, the statewide average for regular is $2.96 a gallon, according to the American Automobile Assn., and the national average is $2.64. That’s well below the $4.54 a gallon we were paying in California a year ago, but it was still disheartening to see the “$3.09” signs at the Shell station at Colorado and Verdugo in Glendale this morning.
Kelley, the Irvine-based auto information firm, surveyed new car shoppers last month about gas prices and found that more than 60% have changed their buying approach because of rising pump prices, with many saying they would make compromises in their choice of a new vehicle in order to save money on gas.
The No. 1 compromise was moving to a smaller engine (a four-cylinder, say, instead of a V6 or V8). That was followed closely by vehicle size (moving down to a mid-sized sedan from a larger model, for instance).
Significantly, 87% of new car shoppers said last month that they expected gas prices to rise, compared with 66% in April. And 73% said they plan to change their spending habits if gas prices go much higher.
“While we may not see the $5-per-gallon gas experienced in some areas last year, current economic conditions compounded by the pain at the pump may make $3-per-gallon gas a new threshold for car buyers -- the point at which they change their mind about what vehicle to buy and how they spend their money,” said Jack R. Nerad, executive editorial director and executive market analyst for Kelley Blue Book and kbb.com.
The rapid rise in prices -- they’ve climbed 20% in the last month -- is a double-edged sword for the beleaguered auto industry, which is struggling to turn around a long slide in new-vehicle sales.
On the one hand, a spike in gas prices could deepen consumer angst and choke off spending, including on new cars, pickup trucks and SUVs. As the Kelley study indicates, it also steers buyers away from bigger vehicles, which typically are more profitable for the automakers.
On the other hand, getting buyers interested in smaller, more fuel-efficient vehicles could benefit the car companies in the long run. Over the next few years, they’ll have to produce vehicles that meet tough new fuel economy and emissions in the U.S., and there has been considerable debate over whether consumers will be interested in buying fuel-sipping compacts or premium-priced hybrids.
-- Martin Zimmerman