American Gas Guzzling Down, but Price Stays High

March 3, 2008— -- In San Mateo, Calif., $4 a gallon has become less of a shock and more of a reality. A Shell station here recently sold regular gas for $4.23 per gallon.

"I'll drive farther and use more gas to not pay over $4 for gas," said one motorist.

He drove off in disgust, while another filled up out of desperation.

Nationwide, Americans are paying $3.16 per gallon, up about 66 cents from a year ago. Oil's price per barrel has made headlines every time it's gone up another dollar, causing many to think it couldn't possibly go any higher.

But drivers won't be getting relief anytime soon.

Though the rest of the country isn't seeing $4 gas yet, consumers are finally changing their behavior. In the last six weeks, according to new government data, Americans bought less gasoline than they did a year ago -- the first sustained drop of its kind in 16 years.

So Americans are making adjustments. Last year, U.S. sales of hybrid cars -- using a combination of gasoline and electricity -- rose 39 percent. When buying conventional models, more Americans are choosing smaller 4- and 5-cylinder engines.

Even in California, where the car is king, Amtrak is selling more seats. In Chicago, ridership on Metro commuter trains is the highest in 24 years.

Americans may be changing their gas-guzzling ways. But when it comes to prices, the old law of supply and demand appears out of step.

U.S. gasoline supplies are at a 14-year high, consumer demand is down and yet investors worldwide are driving up prices for commodities in general and crude oil in particular. So even though Americans are consuming less gasoline, they can expect to pay more for it down the road.

This latest price spike seemed to come as a surprise to President Bush. Responding to the idea of $4 gasoline at a news conference last week, he said, "That's interesting. I hadn't heard that."

This reaction is no surprise in itself, said Democrats in Congress.

"The administration has been out of touch with ordinary customers at the pump for eight years," said Rep. Edward Markey, D-Mass.