Consumers drive down gas prices

By Tiffiny Woo

Published: September 5, 2008

Gas prices have been dropping around the state.

And Clay Ingram, public relations and marketing manager for the Alabama division of American Automotive Association, or AAA, says it’s nice to be talking about lower gas prices for a change.

“Prices have been dropping for the past 6-8 weeks,” Ingram said last week. “I think we’ve hit a plateau because of Labor Day weekend and Tropical Storm Gustav.”

Gas prices had been hovering around $3.50-$3.55 per gallon in the Eufaula area - slightly below the state average. Some stations were offering gas for $3.60 or more per gallon by last weekend due to Hurricane Gustav. However, that is still at least 30 cents lower than the previous highs during the summer.

Consumers have been the driving force in lowering gas prices.  The reasons are simple. Lower demand plus increased competition between gas companies equals lower prices.

Ingram says prices are directly related to the demand for fuel. More and more motorists have been conserving fuel, carpooling when necessary and just simply staying off the road. As the demand for fuel decreases, the oil companies don’t need to import from foreign sources as much. The same way that high demand tightens the market and raises prices, lower demand allows the oil market to relax, inventory to increase and prices to decrease.

Eufaulian Sarah Goodie says she has been able to cut out some of her daily driving distance lately, but that prices aren’t stable enough for her to consider it an improvement.

“Prices are down today and up tomorrow,” she says, adding that she likes to shop around for the best prices in town.

Dee Gregor, however, says she doesn’t bother to price shop since most stations charge about the same amount for gas anyway.

“It takes me $7 to drive into town,” she says. “Everyone complains but nobody’s doing anything about it.”

Gregor is a Henry County resident who lives near Turner II but shops Eufaula.

“I don’t shop around much because all the gas stations pretty much match each other anyway,” she says.

But Ingram says price shopping is another way consumers have helped lower the cost of fuel. “For the past 70 years, there’s been a mentality where people would instinctively look for the lowest price per gallon,” said Ingram. “If two stores were side by side and one was 98 cents per gallon and the other was 99 cents per gallon, everyone would instinctively go to the station with 98 cent per gallon gas. It’s how our parents did it, and that’s how we learned to do it.”

Price shopping causes competition between gas companies, and, equally as important, it creates competition between gas stations. This forces suppliers to charge the lowest possible price for fuel.

“After the hurricanes came through, people were more worried about whether or not there would be gasoline to purchase rather than if they could get it a few cents cheaper somewhere else,” said Ingram.

“And since then we’ve gotten away from that price shopping mindset. The idea is that if we’re paying over $3 per gallon anyway, what’s a few cents difference, which makes sense but it sends a message to the gas companies that we’re going to buy it no matter what price they charge. We’ll complain about it, but ultimately we’ll buy it.”

Recently, consumers have shown a return to price shopping, which has helped reduce the cost of fuel.

“As long as we continue to conserve fuel and compare prices, we should see it drop even more through the rest of this year and into early next year,” said Ingram.

Due to Hurricane Gustav and Labor Day weekend, consumers can expect a slight, short-term increase.