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Economists see signs that drivers are reaching the threshold of price pain

A record number of Americans are hitting the road this Independence Day weekend, including a record 3.1 million Texans. And they’re not letting record-high gasoline prices derail their plans.

Still, economists at the Federal Reserve Bank of Dallas believe higher prices could eventually push drivers to their limits.

“All told, fuel prices may be closer to consumer pain thresholds than inflation-adjusted prices suggest. And if prices rise, expect consumers to respond by reducing fuel consumption and overall spending,” Garrett Golding, the bank’s senior business economist, wrote in a recent blog post.

Expanding on that thought via email with the Reporter-Telegram, Golding said the national average for gasoline is down about 15 cents over the past two weeks. “But we’re still $1.50 above where we were in February. Any regression is welcome, but it will not be enough to seriously improve the situation for most consumers,” he wrote.

In some sense, Golding continued, high fuel prices are beginning to lead to demand destruction.

“US gasoline consumption was on track to meet pre-pandemic levels at the start of the year, but since early March it has gradually moved away from that path. This suggests that consumers are changing their behavior. What we have yet to see is a major decline in fuel consumption,” he wrote.

While it’s too early to gauge the impact on consumer behavior, they suspect work-from-home options are having an impact, he explained. Travel fuel consumption is estimated at 30 percent of gasoline consumption.

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