Relentless pump prices a pain in the pocket [The Pittsburgh Tribune-Review]

Dec. 30--It's been decades since gasoline took such a big bite out of the family budget.

The typical American household will spend $4,155 filling up vehicles this year, experts predict. That is 8.4 percent of what the median family takes in, the highest share since 1981, according to the Oil Price Information Service, a Gaithersburg, Md., company that tracks oil and fuel prices.

Combine increased driving costs with stagnant wages, bigger food bills and rising medical costs, and many consumers feel pinched. That has slowed the country's economic recovery, said Kurt Rankin, an economist with PNC Financial Services Group Inc.

Consumer spending accounts for about 70 percent of the economic activity, Rankin said.

"Every dollar that's not available for disposable spending, say like going out to eat or buying a new TV ... that's a dollar that can't go back into the local economy," he said.

Gas averaged more than $3.50 a gallon this year across the country. In Pittsburgh, gas prices fell in recent weeks to an average $3.30 a gallon for regular. But the price remains about 25 cents a gallon higher than at the end of 2010.

Although people can shop around for better food prices or put off some medical procedures, Rankin said workers have little choice but to continue filling cars. "Even some grocery lists would be cut back before gas," he said.

"You have to give something up, obviously," Scott Rieland said this week as he filled his Nissan Pathfinder with $45 in gas at a BP station on McKnight Road in McCandless.

Rieland, 49, of Mt. Airy, Md., was visiting family in Pittsburgh and said he compensated for higher gas prices by cutting back on longer trips. "You still have to drive," he said.

In the past, high gas prices went hand-in-hand with economic good times, making them less damaging to family finances. Now prices are high despite slow economic growth and weak demand because developing nations in Asia and Latin America are using more.

That puts the squeeze on American consumers.

Flat wages for the typical American "amplifies how much less the average family has to spend," Rankin said.

Since the second half of 2008, prices for food and medical treatment outpaced the rate of inflation in Pittsburgh. Food costs climbed 7.4 percent, and medical costs jumped 12.1 percent, according to the Bureau of Labor Statistics'Consumer Price Index, or CPI.

Food prices spiked this year as corn supplies declined because of bad weather in several parts of the world. The price of corn affects most food products in supermarkets. Farmers use it to feed the cattle, hogs and chickens that later go to slaughterhouses to fill the meat aisle. Corn is the main ingredient in many cereals and snack foods. Turned into corn syrup, it sweetens most soft drinks and many other items.

Medical costs have been rising for years. The Commonwealth Fund, a New York foundation that studies health care issues, put the average premium for a Pennsylvania family with employer-sponsored health insurance at $13,550 last year, up 48 percent from 2003. Employees pay more of the costs of health insurance. The average deductible for a single person nearly doubled between 2003 and 2010 to $1,025 a year, the Commonwealth Fund said. For a family, the average rose 83 percent to $1,975.

Yet relief comes in other prices: The cost of housing, whether renting or buying, increased only 0.9 percent in Pittsburgh since the second half of 2009, CPI data show. Natural gas prices, for heating and cooking, fell nearly 39 percent over that period.

Gasoline prices continue to climb, though, even as Americans consume less of the fuel. In 1981, when the economy slid into recession and oil prices climbed because of Middle East turmoil, gas ate up 8.8 percent of the typical family budget, according to the Oil Price Information Service.

Today, the United States burns almost no oil to generate electricity. The percentage of households using heating oil has fallen. And vehicles are less thirsty than ever -- 20 percent more fuel-efficient than they were in 1980. By 2000, the typical Pennsylvania household was spending less than 4 percent of income on gasoline. This year, that figure is 6.1 percent, below the national average of 8.4 percent, and down from a state peak of 6.6 percent in 2008.

PNC's Rankin said steady or declining gas prices during 2012 will be an important factor in boosting consumer confidence, which gained strength in recent months and played out in better than expected holiday sales.

Consumers adjust to higher prices, Rankin said. "As long as they don't jump back up for any extended period ... that's going to give consumers confidence."

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