U.S. Economy Copes with High Oil Prices With oil at $129 dollars a barrel, some might expect the U.S. economy to be near collapse. There is a slowdown. But while some sectors are definitely feeling the pain, others have adapted much better than anticipated.
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U.S. Economy Copes with High Oil Prices

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U.S. Economy Copes with High Oil Prices

U.S. Economy Copes with High Oil Prices

U.S. Economy Copes with High Oil Prices

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  • <iframe src="https://www.npr.org/player/embed/90664169/90664119" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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With oil at $129 dollars a barrel, some might expect the U.S. economy to be near collapse. There is a slowdown. But while some sectors are definitely feeling the pain, others have adapted much better than anticipated.

STEVE INSKEEP, host:

So we're looking at news dispatches from around the world here. And here's a note saying that somebody paid $130 per barrel for oil in Singapore today. Here in the United States, high oil prices translate to high gas prices, around $4 a gallon, give or take, depending where you are in the country. A Senate committee today holds a hearing to investigate what's behind those prices, and there are signs that consumers may be close to maxing out their budgets. NPR's Scott Horsley reports.

SCOTT HORSLEY: At a AAA office just off the interstate in San Diego, the parking lot is nearly full, and club members are lined up at the counter collecting road maps and guide books. Chuck and Paula Duran are planning a three-week RV vacation to the Pacific Northwest this summer. It's 2,600 miles round trip, or about 430 gallons of gasoline.

Mr. CHUCK DURAN: Not too good.

(Soundbite of laughter)

Mr. DURAN: I get about about six miles a gallon, I think. So I shudder every time I fill up.

HORSLEY: Gas on the West Coast is even more expensive than the national average, about $3.95 a gallon. But that's still not pricey enough to keep the Durans at home this summer.

Mr. DURAN: The gas prices, I'm concerned, but it's a trip that we want to see our grandkids. So it's worth it.

(Soundbite of laughter)

HORSLEY: A AAA survey finds nearly 38 million Americans plan to travel over the upcoming Memorial Day weekend. That's down from last year, but only by about 1 percent. AAA's Mike Pina says most people aren't willing to scrap their summer vacations, but they will try to offset rising gas prices by saving money elsewhere.

Mr. MIKE PINA: What we're seeing is that people tend to travel, but they tend to take shorter trips. They tend to take fewer trips. And then when they do travel, they're more likely to stay in a less expensive hotel, eat in a less expensive restaurant, and not spend money on things that aren't necessary, like souvenirs.

HORSLEY: Soaring gas prices have forced consumers to adjust their driving habits a little bit. According to the tracking firm MasterCard Spending Pulse, drivers bought fewer gallons of gasoline in each of the last four weeks than they did a year ago. Still, vice president Mike McNamara says even though Americans are putting less in the tank, their overall gas bill is going up.

Mr. MIKE McNAMARA (Vice President, MasterCard Spending Pulse): It's really siphoning spending out from other areas of the economy.

HORSLEY: A survey released yesterday by Shopping Centers found high gas prices are prompting consumers to cut back on restaurant meals, entertainment and the purchase of shoes and clothing. That said, many observers are surprised the U.S. economy hasn't taken an even bigger hit. Now that oil prices are nearing $130 a barrel, Nigel Gault of the forecasting firm Global Insight says so far, consumers have not borne the full brunt of that cost. While the price of crude oil has more than doubled in the last year, the price at the gas pump has risen only about 18 percent.

Mr. NIGEL GAULT (Global Insight): The price of gasoline at its present level certainly cannot be laid at the door of oil refiners' profiteering, because their margins really are being squeezed. It really is down to the global demand and supply for the crude oil. That's what's driving the gasoline price now.

HORSLEY: And while strong demand from China, India and the rest of the world is partly responsible for driving up the cost of crude oil, Gault says it's also helping to cushion the blow of weak consumer demand here at home.

Mr. GAULT: This will strengthen the rest of the world that it is bringing us very rapid export growth. So we're losing on one side - in fact, we're paying higher prices for everything, but we're gaining on another side in that the global market for U.S. goods is much bigger than it was.

HORSLEY: American consumers might take some comfort from that this Memorial Day weekend, even if the summer isn't likely to bring a vacation from higher gasoline prices.

Scott Horsley, NPR News, San Diego.

INSKEEP: As gas efficient as ever, it's MORNING EDITION from NPR News.

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