Is $3 a Gallon a Tipping Point?

Is gas at $3 a gallon a tipping
point?

It appears that $3 a gallon gasoline could be a tipping point. I’ve heard it being talked about and I’ve read articles in the mainstream press about it.

Several reactions to higher gas prices are now making news. William Ford, Jr., CEO of Ford Motor Company, says by 2010 half the company’s autos will be hybrids. GM reports SUV sales dropped in the past few weeks as gas prices rose. Toyota, on the other hand, sold more of their fuel efficient small cars. The Christian Science Monitor tells of commuters creating van and car pools. The Motley Fool takes a look at the most fuel efficient cars.

The most interesting analysis, however, concerns Wal-Mart. The retail giant is reporting lower store traffic as gas prices increase. A white paper on energy produced by The Buntin Group, an advertising and marketing company in Nashville, offers an intriguing insight into the Wal-Mart business model and how rising gasoline prices may affect the retail giant, and by extension how they may affect individuals and the business community.

Buntin cites a study by the National Retail Federation (NRF) that indicates how fluctuating gas prices may affect consumer’s spending habits. In the NRF suvey, approximately 145.3 million citizens of the U.S. say they will decrease vacation travel plans, dine out less often, spend less on clothing and groceries, and delay major purchases such as cars, furniture, and electronics. The Buntin paper was completed in August, several days before the two hurricanes hit the Gulf Coast. The survey asks consumers about their intent and, therefore, is subject to predicted, not actual, behavior.

Never the less, the predictions run headlong into Wal-Mart’s expansion strategy which is based on building super centers in small rural communities attracting users from a 20-mile or greater radius, according to the Buntin report. This strategy is built on $1 a gallon gas. “Three dollars a gallon poses a monumental threat to the company with almost no remedy available,” the report states.

Buntin says that customers who were making the 40-mile round trip are already saying “no” to spending $10 for the trip. This is creating an opening for “Mom and Pop” retailers in the local community who have, until now, been annihilated by Wal-Mart. If this plays out according to the analysis it could mean the re-vitalization of certain types of small businesses in closer proximity to their customer base in small towns. That’s quite a dynamic to ponder.

Beyond the economic questions, I am interested in what this might mean to The United Methodist Church. In suburban and exurban communities the church has also built on the presumption of cheap gas. Will higher prices affect attendance and participation?

Equally important, how will increasing costs for gasoline and other consumer goods made from petroleum crude affect giving? I believe this is a major unanswered question that could have much more direct impact on church budgets than the catastrophic losses to property and congregational life in the Gulf region.

Buntin points out that crude oil is used for many more products than gasoline. It’s the base for diesel fuel and heating oil, liquified petroleum gas, heavy fuel oil and a variety of plastic products.

The underlying question that can’t be fully answered yet is how, or if, discretionary spending is affected by increasing prices for gas at the pump, in the home, and for products at the retailer. And most important for the church, how will these affect giving to mission and ministry?

I’m not pessimistic. People are demonstrating remarkable generosity. However, giving as a percentage of income has remained relatively stable in most U.S. households for a number of years. Giving per capita when compared to income has increased in small increments in The United Methodist Church, but not dramatically.

So, the data are mixed. It’s early enough to see some changes in behavior, but too early to know how these economic factors will affect the church for the long haul.

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