Congress Urged to Ease Pain of Gas Prices

Eddie Engels of Chicago finishes pumping over $83 of gas into his GMC Yukon, Tuesday, May 15, 2007, near downtown Chicago as gas prices continue to soar. Most Americans are locked in to their driving habits, and can do little to alter them when prices rise, experts say. Indeed, demand for gasoline rose over the last month, even though prices were rising toward record highs. At the same time, refineries have experienced more downtime this spring than in years past, cutting the gasoline supply. The combination of low supplies and high demand is what's sending prices up to almost $4 a gallon in some areas. (AP Photo/Charles Rex Arbogast) (Charles Rex Arbogast - AP)

"We might actually see some reaction at $3.50 (a gallon)" nationally, said Larry Compeau, executive officer of the Society for Consumer Psychology and professor of marketing and consumer psychology at Clarkson University in Potsdam, N.Y.

Lars Perner, assistant professor of clinical marketing at the University of Southern California's business school, disagrees, saying the tipping point is more likely $4 a gallon.

Try telling that to Jennifer Hoover, 32, a graphic designer who lives in the San Francisco area. She said she was startled by her bill _ $58.69 to fill up her silver Audi sedan with $4.09 a gallon premium gasoline Tuesday _ but was late for an appointment and had no other choice.

"I was just thinking when I drove up _ 'Why am I stopping here when it's $4.09?'" she said. "But it's on my way and I'm late and I have to do what I have to do."

Eddie Engles, 37, didn't blink twice after he filled up his GMC Yukon at a gas station near downtown Chicago on Tuesday. At $3.71 a gallon, the fill-up cost the clothing distributor $83.89. "That's a new record. Every time I pump up, it's a new record," he said.

Engles, who uses his sport utility vehicle to haul his wares, said he has few options when it comes to cutting down on travel and gas expenses. "I just need it," he said. "What am I going to do? Not fill up?"

There was a definite consumer reaction in September 2005 after Hurricane Katrina outages pushed prices above $3 gasoline for the first time. Demand dropped as much as 6.5 percent. "There was ... something significant psychologically about the $3 barrier," Perner said.

Since then, however, consumers seem to have adapted, with demand rising throughout a brief period of prices above $3 a gallon last summer.

"People complain about higher oil prices ... but they still drive their cars, they still buy their SUVs, they don't want to carpool," said Fadel Gheit, an energy analyst at Oppenheimer & Co.

"It's a little inconvenient for me to take the bus," said David Harris, 31, a film school marketing manager in Los Angeles who commutes 40 miles a day for work.

Consumers may suspect that oil refiners are colluding in the recent price spike, but analysts say the real culprit is an unprecedented number of refinery accidents and maintenance outages this spring _ combined with drivers' rising demand for fuel. Most prominent of the outages was a February fire that shut down Valero Energy Corp.'s 170,000 barrel-per-day McKee refinery in Sunray, Texas, for months.

"If you just count incidents, there are more this year than there have been in previous years," said Mike Conner, a specialist on refinery operations at the EIA.