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We're spending more on gasoline, less on having fun

16 June 2008

By Steve Kanigher, Las Vegas Sun
NEVADA -- Gas prices are siphoning tens of millions of dollars out of Clark County's economy as money is being spent at the pump instead of at restaurants, on entertainment and on other discretionary items.

Local motorists are buying slightly less gas but spending substantially more for it, according to figures compiled by AAA and the Nevada Department of Motor Vehicles.

In the first three months of this year, drivers spent an estimated $616 million on gas in Clark County, 20 percent more than the $513.8 million spent in the same period in 2007.

That hefty hike occurred even with a slight drop in gas consumption. Motorists here purchased 195.8 million gallons in January through March, down from 197.6 million gallons during the first quarter of 2007.

Last year, as gas prices crashed through the $3-a-gallon barrier, Clark County drivers spent roughly $2.37 billion on gasoline, nearly twice the $1.24 billion spent in 2003 — a year when, in June, a gallon of regular could be had for what now seems like the incredible bargain price of $1.71.

"Any time you're talking about a $1 billion increase in consumer spending in a specific area, that's significant," said Brian Gordon, a partner in the Las Vegas economic analysis firm Applied Analysis.

With regular gasoline last week having topped $4-a-gallon for the first time in Las Vegas, economist Keith Schwer of the UNLV Center for Business and Economic Research said he expects motorists to continue to buy less gas.

"I think $4 will get people's attention," Schwer said. "People will either start to drive less, share a ride with somebody else or take public transportation."

Spending more on gas leaves less money for entertainment and other nonessential goods and services, and forces many people to make tougher choices involving food and medicine, which also have shot up in price.

"Consumers will find ways to reallocate their budgets and focus on the essentials," Gordon said.

Las Vegas has experienced the fallout. Schwer said Southern Nevada is in its first recession since the 9/11 attacks. Gaming revenue is down. Purchases of big-ticket items such as automobiles and furniture are on the decline, and people are doing more value shopping.

Compared with March 2007, Clark County's taxable sales in March of this year were down 10.9 percent for motor vehicles and parts, 13.3 percent for electronics and appliances, 14.9 percent for furniture and home furnishings and 19.2 percent for building material and garden equipment, according to the Nevada Taxation Department.

That suggests that rising gas prices, coupled with the credit crunch and other factors in a tightening economy, are prompting consumers to rein in spending.

"Instead of buying steak they may buy peanut butter," Schwer said. "For clothing, instead of going to a department store, they may go to Wal-Mart. Instead of spending $100 at a casino they may spend $60. Instead of going to a fancy restaurant they may eat hamburger."

And sometimes, instead of going out anywhere, people are deciding to stay at home to cut their gas costs.

Although no one tracks precisely how much money is spent on gasoline in the county, the Sun arrived at its estimates by taking the DMV's figure for monthly gallons and multiplying by the average valley prices for regular unleaded, midgrade and premium fuel since January 2003. National averages for use of regular, midgrade and premium were factored in.

In June 2003, average prices in the county, beyond the $1.71 per gallon for regular, were $1.80 for midgrade and $1.86 for premium, AAA reported. By Friday the prices had climbed to $4.22, $4.45 and $4.61, according to AAA, which bases its figures on data from the Oil Price Information Service.

Gasoline volume is considered a leading indicator of a community's economic health. When volume is up, it means more people are going to work or engaged in other activities.

Because of population and tourism growth the amount of gas purchased in the county steadily increased from 695.9 million gallons in 2003 to 811.8 million gallons last year.

"Clearly people are outraged at the prices they're paying," said Michael Geeser, spokesman for AAA Nevada.

"The question is, what are we going to do about it? Nobody seems to have a real good answer to that question. In Southern Nevada we seem to be married to the automobile. There don't seem to be any good alternatives. If we don't get in our car, there's a good chance we won't get to work. The way our valley is set up, you need a car."

Although many assume gas station operators must be making a killing, Peter Krueger, state executive of the Nevada Petroleum Marketers & Convenience Store Association, said the opposite is the case when it comes to the independent businesses he represents. The big profits are going to major oil and gas companies, which does nothing — at least nothing good — for the local economy.

Fewer motorists are paying cash for their gas. Instead, they're turning to credit cards, forcing independent operators to pay 3 cents on the dollar in processing fees — 12 cents per gallon as gas crossed the $4-a-gallon threshold. That is severely cutting into their profits, Krueger said.

"On a good day our guys might make 15 cents a gallon, but now some of them are running into the negative when you include rent and overhead," he said. "Convenience store purchases are down, and instead of people filling up their tanks, they're filling up maybe 10 gallons at a time. There's nothing we can do about the prices, so we're caught in the middle."

Copyright © Las Vegas Sun. Inc. Republished with permission.


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