COST: The soaring fuel prices are starting to alter spending patterns and discretionary spending, which could weaken the state’s economy.
Soaring fuel costs run the risk of weakening Colorado’s economy, analysts say.
Record high prices for gasoline are beginning to alter consumer spending patterns, skewing expenditures toward fuel and away from other retail sectors.
Discretionary spending on dining, travel and entertainment could be especially susceptible to consumer shifts if energy prices stay high, said University of Colorado economist Richard Wobbekind.
“Obviously the higher fuel prices will consume a larger part of disposable income,” he said. “This will erode purchasing power.”
A Denver Post analysis of fuel consumption and costs shows that metro Denver residents now are collectively spending $36.25 million more per week on fuel than in late January, when self-service regular was at its lowest price this year, $2.09 per gallon.
Colorado’s average price Friday was a record $3.34 a gallon, according to AAA.
The higher price equates to an extra $36 a week in fuel spending for the average metro Denver household, compared to the costs of filling up in January.
While some analysts expect gas prices to fall after the Memorial Day holiday, most expect them to stay above $3 a gallon through the rest of the summer.
Costs are high because of rising crude oil prices, diminished output from refineries undergoing repairs and maintenance, and pricing premiums that investors have placed on oil and gasoline because of the prospect of supply disruptions from war, terrorism or hurricanes.
Higher fuel costs could cause problems for merchants and tax collectors, said economist Patty Silverstein of Development Research Partners in Jefferson County.
“It likely can mean less spending on other retail items, which results in less sales tax revenue for local governments,” she said. The cities and counties “already are juggling tight budgets and trying to maintain services to their citizens.”
Silverstein said fuel prices are at the level that consumers will begin making behavioral changes such as carpooling, purchasing fuel-efficient vehicles and using more mass transit.
She and Wobbekind noted that high prices for gasoline have a disproportionately severe impact on the poor and households with fixed incomes.
“The impact will not be uniform across all income brackets,” Wobbekind said. “We have already seen some impact on the lower end of the income distribution as measured by consumer confidence and discount retailer sales. Thirty-six dollars a week (in higher fuel costs) means a lot more when you are in the lower income brackets.”
However, he said the negative effect of high fuel prices could be offset in part by other economic indicators.
“Bear in mind that other energy costs such as electric and (natural) gas are typically lower this time of year so I don’t expect to see a large effect,” he said. “Nationally the growth in personal income seems to be offsetting the negative energy effects. I expect the same will be true in Colorado.”
Michael Hughes, a Denver college student looking for a summer job, said he has cut all of his discretionary spending in response to high gasoline costs.
“It’s putting a hurt on me,” Hughes said Friday while filling the tank of his Honda Accord with $3.29 regular.
“I may not even be able to pay for tuition this fall,” he said. “I guess I’ll be getting on my bike a lot more.”
Staff writer Steve Raabe can be reached at 303-954-1948 or sraabe@denverpost.com.
Calculating gas costs
The Denver Regional Council of Governments has calculated that metro Denver residents drive a total of 456 million miles per week, including average commutes of 22 miles round trip plus shopping, errands and leisure travel.
Data from the Colorado Department of Revenue show that fuel sales in metro Denver average 29 million gallons a week.
Dividing total miles driven by gallons of fuel sold provides an average vehicle mileage figure of 15.7 miles per gallon.
Using vehicle mileage and fuel sales for the region’s million households, the difference between this year’s low gas price of $2.09 and the current price of $3.34 means that typical households are paying $36 more each week to fill up.
