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As Gasoline Goes Up, U.S. Motorists Change Their Habits

American motorists are making minor adjustments to their driving habits to ward off the sting of near-record retail gasoline prices, analysts said on Wednesday.

A U.S. government report released Wednesday showed that gasoline demand growth over the past four weeks has slowed to zero as pump prices rocket toward $3 a gallon. Demand growth typically runs just below 2 percent per year.

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"There is evidence that American drivers are making some adjustments as a result of high prices," said Mark Routt, analyst at Energy Security Analysis Inc. "People are trimming discretionary travel and choosing options other than driving to get places when they have that choice."

U.S. motorists are paying up an average of $2.92 per gallon, up from $2.22 a year ago and $2.58 last month, according to AAA motor club. Energy Secretary Sam Bodman said Tuesday gasoline prices are a "crisis" for Americans.

The jump in prices comes as crude prices hover near record highs of $75 a barrel hit last month on concerns over Iran's nuclear program, and some experts say sticker shock could keep U.S. demand below normal levels all year.

Gasoline demand growth so far in 2006 is running at about 0.2 percent, compared with average annual growth of 1.7 percent over the past decade, Routt said.

But prices are still below the record high of $3.07 per gallon after Hurricane Katrina battered U.S. oil infrastructure along the Gulf Coast last year. EIA officials said prices would have to remain over $2.80 per gallon for months for demand growth to actually fall into negative territory.

"The last time we saw a decline in gasoline demand was the late 1970s to early 1980s," said Doug MacIntyre, EIA analyst, referring to the energy price spike around the Arab oil embargo.

MacIntyre said the fact that the savings rate is down shows that Americans are willing to dip into their bank accounts to keep their cars and trucks on the highways.

Adjusted for inflation, today's gasoline prices are still lower than they were in March 1981, which at today's dollars would be $3.20 per gallon, MacIntyre said.

Other analysts agreed.

"I think you are seeing changes in habits but I think actually sustained destruction would be at a higher level than what we are at now," said Jason Schenker, analyst with Wachovia Bank based in Charlotte, North Carolina.

If demand dropped significantly, however, it could help the United States avert supply disruptions some experts said may be caused as the new greener fuel specifications come into effect.

"It (would) make it much more likely we will get through without major supply outages," said Deborah White, senior energy analyst for Societe General.

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