Gas Prices Drive People To Pinch Pennies

Web By CHERIE JACOBS cjacobs@tampatrib.com Published: Mar 29, 2003

TAMPA - With a $20 bill in her hand, Cindy Arens was skipping the chips.

She topped off her gas tank, stopping the meter just shy of $19, and used the last dollar or so for a Diet Coke inside the 7-Eleven at Gunn Highway and Henderson Road.

``Normally, if I was going in I'd spend $20 on gas and probably $3 or $4 on munchies.''

But gas is now so expensive that it takes more than $25 to fill the tank of her Toyota Camry. So she skimps on both the gas and the food.

``I don't want to go over $20,'' the 52-year-old Tampa woman said.

Arens represents the changing economy. As gas prices hover near all-time highs, consumers are cutting back in other areas.

Friday's Commerce Department report showed consumer spending was flat in January and February, holding at an annual rate of $7.49 trillion.

Although winter weather was a big factor dampening retail sales in February, economists said consumers are becoming more cautious in the muddled economic climate.

From cups of coffee to bags of chips, consumers are trimming nickels and dimes from their everyday expenses.

The chief executive officer of 7-Eleven, Jim Keyes, has noticed. When gas prices rise, his stores across the country sell fewer gallons of milk and cartons of cigarettes, instead selling more quarts of milk and single packs of smokes. Some shoppers eschew large coffees and Slurpees for smaller sizes.

We think gasoline is a bigger driver of the near-term economy than unemployment. When gasoline costs go up 20 cents a gallon, it affects everyone,'' Keyes said. More and more people are looking at gasoline being a daily necessity. It forces a difference in your buying patterns.''

In February, 7-Eleven stores in Florida reflected that trend.

Small coffees were outselling larger sizes by at least 30 percent, compared with the previous month, when gas prices first jumped. In that same time, sales of gallons of milk were down 8.5 percent. Single-serving bags of chips were up 14 percent compared with January's sales.

If the price of gasoline rises 20 cents a gallon, that could cost a customer an extra $50 a month, he said.

If you had $100 in your pocket for the month, and now you have $50, you have no choice; you have to cut your spending back,'' Keyes said. I'm not sure it's as much conscious as it is `How much change do I have in my pocket?' ''

One economist says the concept is real.

``If you have to pay $25 for a tank of gas, you're less likely to buy something at the convenience store,'' said Brad Kamp, associate professor of economics at the University of South Florida in Tampa.

Products related to each other are called complementary goods. An example is chips and salsa. When the price of salsa drops, sales of tortilla chips go up, he said.

The stuff at a convenience store is almost entirely complementary to gas,'' Kamp said. You wouldn't think that candy and gasoline are related to each other, but they are.''

The national average gas price has risen nearly 20 cents a gallon since the first of the year because of a recent strike in Venezuela that reduced exports to the United States; tight worldwide crude oil supplies; and nervousness about conflict with Iraq.

Gas rose from about $1.47 for a gallon of regular unleaded to $1.66 - so putting 10 gallons in a tank went from $14.67 to $16.63. That means customers have to shift the extra $2 they would spend on coffee or chips to pay for the higher cost of gas.

Because of that, most convenience stores probably have seen a drop in sales of candy bars and gallons of milk, Kamp said.

``When you just had a sticker shock of putting all your money into your gas tank, you're less likely to buy something on impulse,'' Kamp said.

Times like these trigger patterns in consumer spending, said Cary Silvers, vice president with marketing research firm RoperASW in New York.

It's the nonessential expenditures that consumers slash first, typically - reductions in spending on luxury items, dining out and entertainment, he said. Big-ticket purchases such as cars and houses generally are postponed.

For author David Bach, penny-pinching was such an attractive savings strategy that he registered a trademark on the phrase ``latte factor'' to express the idea that people can save millions of dollars over their lifetimes by cutting out small expenses, like the pricey, milky coffee latte.

That's borne out in February's consumer spending numbers. Shoppers cut spending on big-ticket goods such as cars and appliances by 2.2 percent, on top of a 4.9 percent cut in January. And spending on items such as food and clothes was flat in February, compared with a 1.3 percent rise in January.

Spending on services, including utilities, rose 0.5 percent in February, up from a 0.3 percent gain, a reflection of higher energy prices.

Claudia White is caught in the gas price squeeze. Gone are the days when she pops into the 7-Eleven to get candy or gum. Instead of $14 to fill up her tank, it now costs $18. So she pays at the pump, to avoid the temptation of a cup of coffee or a newspaper.

I don't even go inside anymore,'' she said. I try to pay outside so I don't spend any more money.''

Information from Dow Jones News Service and The Associated Press was used in this report. Reporter Cherie Jacobs can be reached at (813) 259-7668.

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