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With gas costly, drivers finally cut back

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If gasoline does hit $4 a gallon, it might be a "psychological break point," says Dennis Jacobe, chief economist at the Gallup Organization in Washington. "It doesn't just start to affect you financially, but you also start to think how much it costs to go someplace," he says. "People cut back on their recreational use of vehicles and all kinds of travel."

AAA, the national drivers club, has found that when gasoline prices are high, Americans try to compensate. "They travel closer to home. They stay at more economical hotels. They eat out at fast-food restaurants and try to find the shortest route to a destination," says Troy Green, a spokesman in Washington.

In February, a survey by the National Association of Convenience Stores found that 29 percent of the respondents said that high gasoline prices had forced them to change their spending patterns. Forty percent said they tended to drive somewhat less as result of high gasoline prices.

One key to whether Americans will react negatively to gasoline prices is how quickly pump prices rise, Mr. Jacobe says. It is easier for consumers to adjust to a gradual rise. "If we see prices rising fast each day, it scares people," he says.

Energy analysts are concerned that the dynamics are in place for a relatively quick rise this spring. With gasoline inventories high and demand slow, refiners are pulling back on the production of gasoline, says Mr. Cohan. "The refiners are losing money with oil at these levels, so they are cutting back," he says.

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