The Economist
Rose Rubin doesn’t need a lot of gasoline. Her children are grown and out of the house; her husband is retired. And yet, her next car will probably be a hybrid.
“I think [higher gas prices are] going to have a huge long-term impact on our way of life,” she says, “which we’re going to see play out over time.”
Rubin is a professor of economics at the University of Memphis. Though noticeably higher prices occurred after hurricanes Katrina and Rita, Rubin explains that higher gasoline prices are driven by both the supply and demand sides of the economic equation.
“The supply of gas was impacted by both these hurricanes hitting refineries and offshore drilling and by the war in Iraq,” she says. “Iraq is a gas producer, even if we weren’t buying it directly. Other parts of the world were and now they’re forced to go other places. Globally, there’s a huge increase in the number of vehicles in China, India, and Indonesia. We don’t see this directly. What we see directly is the huge increase in the number of bigger vehicles — SUVs and trucks — in popularity here.”
With demand increasing and supply decreasing, gas prices have risen 50 percent in recent weeks, from $2 to $3 per gallon. For other products, the increase might mean a drop in demand, but gasoline sales do not respond quickly to changes in price. A gas station can raise its price and, if other stations do likewise, consumers will still buy gas.
“If you’re going to get out of the car, you have to have an option in terms of public transportation or carpooling or some other form of transportation. Especially in the South and Southwest, public transportation is pretty limited,” says Rubin.
“Does this mean more inflation?” she asks, rhetorically. “The likely answer is yes. The Fed certainly seems to think so. [They] raised interest rates last week.”
Household spending accounts for about two-thirds of the U.S. economy. If people budget a certain amount of their household income for gas and the price increases dramatically, obviously they have less money for other expenses.
“There is concern on the part of business — especially this time of year — that people might spend less on their holiday shopping. This is a critical sales period for businesses,” says Rubin. “In fact, there are some types of businesses — for example, jewelry stores — that do a majority of their business this time of year. If they don’t make it during the holiday season, they have a big concern about not making it for the year.”
In the long run, Rubin thinks we’ll see changes in the way consumers and businesses act because of the higher energy costs. There will be changes in the supply chain, the number of telecommuters and carpoolers, the kinds of cars we drive, and even where we live.
“There have been trends toward reurbanization,” says Rubin. “If gas prices continue rising, I think this is going to facilitate and promote people wanting to move back downtown. … Ultimately, this means you’ve got to have schools, grocery shopping, and services for households in these areas.”
And although economists say it generally takes time to alter a culture’s tastes and preferences, people in Memphis are already thinking about these changes. — Mary Cashiola
The Grocers
Americans already are paying more at the pump, but they may soon be paying more for dinner, too.
The rising cost of diesel fuel means grocers are paying more for freight deliveries, and that translates into higher food prices for consumers. According to the Energy Information Administration’s Web site (eia.doe.gov), the U.S. average for diesel on September 27th was $2.79 a gallon. That’s up more than a dollar from the average price at this time last year.
“Freight rates in the last three months have gone absolutely crazy,” says Barry Carter Jr., CEO of the Memphis-based Easy Way produce stores. “It affects the retail price because we have to figure that into our cost.”
Carter says Easy Way has had to raise prices on some items as much as 20 percent. That means produce that once cost $1 a pound may now cost $1.20.
“For now, it’s a pretty small increase for the customer,” he says. “They’re not saying, ‘I’m not going to buy this until it goes down,’ but there is an increase.”
Carter says the situation is even worse in the fall and winter months when most of the store’s produce is shipped from suppliers farther away. In the summer, the store relies more heavily on locally grown produce, such as Ripley tomatoes.
The locally owned Midtown health-food store Square Foods is also feeling the pinch, but, according to owner Jeanice Blancett, the store has not yet had to raise prices for the customer.
“We’re hoping for gas to go back down, so we haven’t adjusted our prices yet,” Blancett says. “But [if gas prices don’t improve], I think people will understand if things have to go up.”
Blancett says before gas prices began to spike this summer, only a couple of vendors tacked on a fuel surcharge. Now, she says, all vendors are charging from $2 to $10 per delivery. But she’s trying to look at the change in a positive light.
“I’m hoping that with gas prices going up, people who live in Midtown will stay in Midtown to shop, instead of going out east,” Blancett says.
For those who’d rather order food in than drive to the grocery store, remember to tip the pizza guy. Grocery-truck drivers get reimbursed for their extra gas expenses, but some pizza-delivery drivers have to pay out-of-pocket for gas.
Terry Basham, a driver for Papa John’s in Bartlett, says that while most of the drivers were given an extra 20 cents per delivery when gas prices increased, it’s not always enough to compensate.
“Before gas went up, it was something most delivery drivers didn’t think about. What you were paid for your mileage was more than enough to keep gas in your car,” Basham says. “But now you have to put gas in as you need it, and everyone’s always bitching about it.”
Basham says the cost of pizza at Papa John’s has not gone up, but he says, since people are spending more on gas, they’re not tipping as well. The Friday after Hurricane Katrina, Basham says he was only tipped $2 all night.
Whether it’s on a large scale or small, the bottom line is that the price of food is directly impacted by the price of fuel. And since everyone has to eat, that spells trouble for consumers and producers. Carter hopes to see biodiesel technology improve, so that diesel trucks that deliver food freight can make the transition to cheaper fuel. But in the short term, the outlook isn’t encouraging.
“I’ve been doing this for 35 years,” Carter says. “We have never seen this much of an increase in freight rates this fast.”
— Bianca Phillips
The Car Dealer
Dobbs Honda (where the salesmen are gathered around the floor manager’s desk moaning about how they have no cars left on the lot to sell) disappears in the rearview mirror of the Accord hybrid I’m test driving. It’s a silent, comfortable, good-looking car that easily maneuvers through the erratic traffic of Covington Pike. It’s also a heavy machine with a lot of power. You’d never know you weren’t cruising with a V6 under the hood. The hybrid Accord costs about $5,000 more than the standard model, though its gas consumption isn’t that much better. It does, however, score some points on environmental issues.
“When you think of a hybrid car, you think of something with 85 horsepower, like the Civic. And that’s a perfectly good ride,” says Honda salesman Gary Grayson. “But these Accords have 255 horsepower.” Grayson is a Wyoming transplant, new to Memphis and new to selling cars for a living. He’s direct to the point of being blunt, which makes him seem more honest than the stereotypical salesperson.
“The hybrids are a great concept. But they’re more expensive, and I’ve always said that [the Accord hybrid] might not be right for everybody,” Grayson says. He explains that the hybrid gets 47 miles per gallon, while the regular Accord averages in the low 40s. “The hybrid is more like the car for people who spend three hours a day on the road in traffic,” he says, “or who have an hour-long commute to work.”
“Do you hear that?” Grayson asks, as we pull up to a stop sign. But there’s nothing to hear. The hybrid’s engine is designed to shut down whenever the car comes to a complete halt. It starts again when you tap the accelerator. As we pull away from the intersection, Grayson nods his head approvingly.
“For the most part, the hybrid-buyer has been different from the average buyer,” Grayson says. “People who come in to look at the hybrids know 10 times more about those cars than I do, or any salesman on the lot. They’ve learned all about it on the Internet, and it makes my job easier.” But if gas prices continue to go up, hybrid customers could evolve from informed consumers to people who are just looking to save money at the pump. Grayson says rising gas prices have translated into brisk business.
“But these things change,” he adds. “Maybe we’ll get used to spending $100 to fill up our trucks. Maybe next summer we’ll be talking about how everybody’s gone back to driving SUVs.”
But right now, SUVs are increasingly becoming trade bait. “I’d say that 60 to 65 percent of the people who have been coming onto the lot are looking to trade in an SUV,” Grayson says. “There are some days when it’s like, ‘Oh no, not another Tahoe.” — Chris Davis
The Political Commuter
Ron Banks and I are noodling over some fried olives and toasted ravioli and sipping glasses of red wine as we get caught up on some political gossip. This is a pleasant little bar and grill — the kind that has hard-working, fast-moving waitresses who sparkle and smile as they keep refilling your glass or seeing to your appetizers, the kind that in recent years have sprung up all over Midtown and downtown.
But this place, called “The New Bottom Line,” is at the intersection of Kirby Parkway and Poplar Avenue, way out east, and it is loaded to the rafters this Thursday afternoon, filled with homeward-bound commuters like Banks, who works downtown as a Juvenile Court administrator and lives in Germantown.
“Things have really picked up around here lately,” Ron observes, and he hands me a copy of a letter, dated this month, from the Administrative Office of the Courts in Nashville. It says that “due to the increased cost of gasoline,” the mileage rate for personal vehicles used for state business will go up from 38 cents per mile to 46 cents.
Unfortunately, Banks says ruefully, the mileage-rate increase doesn’t apply to Juvenile Court, adding, “our process servers are being impacted big-time by gasoline costs.” These indispensable Juvenile Court grunts start their daily rounds at 5 a.m., Banks says, and they keep driving hither and yon across the breadth of Shelby County until mid-afternoon. And, as he points out, the yins and yangs of social ferment have simultaneously increased their delivery load dramatically. Something, he implies, will have to give.
I ask him how rising gasoline prices have affected him personally. The former salesman muses and recalls that when he first started working for the county eight years ago — as an aide to then Shelby County mayor Jim Rout — gas was in the range of $1 to $1.25 a gallon.
“Back then, I was much more prone to take a lot of meetings,” he says. “Now that it’s up over $3 a gallon, I keep [meetings] to the essential.”
Banks has also been one of the lions of the Republican political establishment over the years, but he no longer makes the activist rounds to fund-raisers and club meetings with the same frequency that he used to. “There’s not much way to carpool on those things,” he says. And he almost shudders as he reflects on the demands of the forthcoming 2006 election season, with its record number of races to be run for state, local, and federal positions, 180 or so in all.
“That’s a lot of moving around to this or that event, and I just won’t be doing it as early or as often as I used to,” Banks says. If there’s a virtue to the situation politically, it is that he’ll be more focused on narrowing down his choices between candidates.
Meanwhile, he keeps his commuting and his weekend rounds to a minimum. Banks and his wife Janie have become devotees of this sprightly little neighborhood bar. “It’s a short distance from home, and it’s a place where we can go to meet friends without having to burn a lot of miles.”
Banks notes that his boss, Juvenile Court clerk Steve Stamson, has succumbed to motives of austerity too. Stamson and his wife Debbie, who is employed in the county clerk’s office, have stopped driving separate vehicles downtown and now ride together. “And we’ve got three folks in our office who ride together in a hybrid-fuel car,” Banks says.
In such a way, the new bottom line on gasoline prices has led to, well, the New Bottom Line. — Jackson Baker
The Bike Shops
With the recent spike in gas prices, many Memphians are reconsidering their transportation options. Bike shops around the city have been seeing increased business as commuters try to avoid shelling out for expensive fuel.
“We’ve seen a 15 to 20 percent increase in customers, mainly people are coming in because they don’t want to keep paying these gas prices,” says Dennis Raml, a mechanic at Midtown Bike Shop.
Many customers are purchasing used bikes or bringing in their old ones for repairs. “I haven’t seen this many clunkers in a while,” says Josh Jorgensen of Peddler Bicycle Shop in Germantown.
“I’ve been selling the heck out of used bikes,” says Hal Mabray, co-owner of Peddler. “People are coming in and getting their old bikes fixed up, getting their tires changed, and buying baskets.” The addition of a basket can turn a bike into a viable commuter option, giving the rider the capability of carrying a laptop or briefcase.
The economic advantage of riding a bike is undeniable. Shop owners estimate that a year’s upkeep on a bike, including tuneups and replacement parts, costs $200 at the most — or about four trips to the gas pump for most full-sized cars. “If you don’t wear out your tires, I would say you could maintain your bike for as little as $50 a year,” Mabray says.
Bike-shop owners contend that commuting in Memphis is possible and efficient for many people. “I commute the six miles from Bartlett to Wolfchase every day,” says Steve Malogorski, owner of Bikes Plus. “In a car, that would take me about 15 minutes. On my bike, it takes about 25.”
“If you live in Midtown, or even Frayser, the commute to downtown is very doable. If you live in the suburbs, I would say probably not,” says Jason Wright. Wright is a Bikes Plus employee and a founding member of Share the Road, a nonprofit organization that hopes to become a lobbying voice for the cycling community.
When asked if Memphis was a bike-friendly city, Wright responds with an emphatic, “Hell, no!” A limited infrastructure is part of the challenge facing Memphis cyclists, but Wright and others see the attitudes of Memphis motorists as the prevailing problem.
“For example, Poplar is fine in terms of its size,” Wright says, “but I can’t ride down that street without being flipped off, yelled at, or run off the road.” Josh Jorgenson from Peddler agrees: “Drivers here can be actively hostile toward riders. Cyclists come into the shop upset because people have rear-ended them or driven them off the street.”
Members of the Memphis cycling community hope that as attitudes about the economy of transportation change, attitudes toward cyclists will change as well. Anthony Siracusa runs the Revolutions Bike Co-Op beneath the First Congregational Church on Cooper, which rebuilds and repairs bikes for riders at little or no cost. “My sense is that Memphians have been ambivalent toward cycling. In the wake of the Katrina crisis, we would like to encourage Memphians to hop on their bicycles and pedal forward.” — Ben Popper
The Working Grandmother
High gas prices are especially hard on working people. Modest incomes and extraordinary family responsibilities often make it nearly impossible for them to survive without a car.
Katie L. Gray of Parkway Village cleans houses for a living, attends Crichton College, and is raising three grandchildren who attend Gateway Christian School in Horn Lake, Mississippi. Her car is vital to her survival, but gas prices are making things tougher.
Each week she puts aside money for gas in a “safety box” in her house so she won’t spend it elsewhere. Before the spike in gas prices to $3 a gallon, $10 for gas would last her about three days. Now she estimates she spends $40 per week on gas for her 1995 Buick Skylark.
With housecleaning jobs in three different parts of Memphis, Bray has little choice but to keep her car, even though she doesn’t mind taking the MATA bus when the car is in the shop. Once she figured out the transfers, the ride usually takes her half an hour and gets her within a few blocks of her destination.
“I love to ride the bus because I can witness to the lost souls I meet,” says Gray, who is studying education, liberal arts, and Bible at Chrichton.
After working and going to class, Gray comes home and tutors her grandchildren until late at night. She sleeps until 3 a.m., then gets up to do her own reading for school.
“If I get three or four hours of sleep a night I’m okay,” she says. The price of gas isn’t keeping her awake yet. But that could change. — John Branston
