CHOOSING FUEL BEFORE FUN

Despite a 3-cent per gallon decrease in local gasoline prices in the past month, fuel costs continue to trip up the delicate dance between expenses and expendable income, and between consumers and businesses.

Heckenlively, a Boulder City homemaker and foster mom to three, is considering skipping the family’s summer "fun trip" because of persistently high gasoline costs.

"We have to do the everyday stuff, like going to work and running the kids to visits and therapy," said Heckenlively as she tanked up Friday at Terrible Herbst on the corner of Rancho Drive and Bonanza Road. "Unfortunately, gas is a necessity. Gas money takes away from fun money."

That kind of talk is anathema to Buck, who leads treks through the Valley of Fire for Annie Bananie’s Wild West Tours.

That kind of talk is also something Buck said he hears a lot lately. He couldn’t say exactly how much his company’s business is off lately, but he’s noticed a decline in the number of tourists signing up for trips through Annie Bananie’s.

"Anything over $3 a gallon is going to be a problem," Buck said. "People stay home. They don’t go on vacation. A lot of people who would drive 100 or 200 miles to visit Las Vegas do not come when prices are this high."

Fuel prices have eased off their May records. Drivers in Las Vegas paid an all-time average high of $3.20 a gallon on May 29, while drivers statewide saw a record of $3.27 on May 27. Prices peaked nationally May 24, when a gallon of gasoline cost $3.22.

Local consumers were paying $3.15 a gallon on average Friday.

The price drop isn’t exactly overwhelming drivers and businesses.

Heckenlively is still paying around $250 a week to fuel up her family’s 2006 Hyundai Santa Fe sport utility vehicle and 2002 Chevrolet S10 pickup truck. That’s more than twice the $100 a week she was paying in early 2006, she said. To handle the steeper fuel outlay, Heckenlively, who drives into Las Vegas twice a week, has cut back on the number of movies she takes her family to see, converting theatergoing once a month into cinema visits every other month. If gasoline prices stay up or climb higher, the family’s annual road trip to Utah could be on the chopping block next.

"We’ll just have to cut out the fun stuff," Heckenlively said.

The gasoline bill on Ivan Brown’s 2004 Dodge 1500 pickup comes in at $85 per fill-up. Brown, who’s retired from the Army and now hauls materials as an independent contractor, has to refuel twice a week. He’s not dining out as much, and he’s scaling back on leisure pursuits in general.

"(High fuel prices) affect your savings, and they affect your ability to do things for your family and friends," said Brown as he tanked up at Terrible Herbst. "They affect your social life, your travel, your luxuries, and the peace time you spend out with your wife or your husband or your friends."

Brown said the 5-cent falloff in average prices isn’t nearly enough to improve his bottom line. Costs would have to retreat to $2.50 a gallon before he could reclaim some of the discretionary-spending territory he’s ceded to pricey fuel.

Businesses are also grappling with high gasoline prices.

Like the travelers it hosts, Annie Bananie’s Wild West Tours is feeling the pinch at the pump.

The company spends $55 a tank to fill up its 13-passenger Ford van, compared with $35 in early 2006. Because of softening sales, the owners are loath to add a fuel surcharge, so for now, they’re "eating the cost," Buck said. The company charges $99.50 per passenger, with group discounts, for a six-hour lunch tour of Valley of Fire. Shedding expenses would be difficult for the mom and pop operation.

"We already work on a shoestring," Buck said. "We have only one tour guide. You can’t cut the one tour guide."

So Annie Bananie’s is going to grow rather than shrink. Company officials hope to buy a second vehicle in coming months and add trips to Red Rock National Conservation Area, the Grand Canyon and other area attractions.

The idea, said Buck, is to lure more consumers with more-diverse options.

Analysts say businesses and their customers will likely have to continue making budgetary concessions to fuel prices at least through the summer and into early 2008.

Michael Darda, chief economist at MKM Partners in Connecticut, said as long as the cost of crude oil exceeds $65 a barrel, gasoline prices will stay above $3 a gallon.

Crude oil, a key component in gasoline, closed at $68 a barrel in trading Friday.

Oil isn’t expensive relative to the costs of other commodities, Darda said, so it’s unlikely that crude prices would slip in the near term.

Also, the global economy remains strong, he said, so demand for petroleum and its related products is high.

A worldwide economic slowdown would rein in gasoline prices, but Darda said experts don’t foresee sluggishness in global markets. Darda’s analysis of crude prices showed that gasoline costs could reach $3.30 a gallon by the end of 2007.

Sustained fuel costs above $3 a gallon won’t necessarily hurt the nation’s or Nevada’s economies, Darda said.

Labor markets are still strong, with unemployment at 4.4 percent in the Silver State and 4.5 percent nationwide. High employment is yielding income gains and asset growth among consumers, and that enhanced wealth should prop up discretionary spending, Darda said. For example, record springtime fuel prices weren’t enough to restrain consumer retail spending, which jumped 5 percent nationwide in May when compared with May 2006.

Changing expectations among drivers will also buffer the economy from expensive gasoline.

"We’re going to have to get used to $3 a gallon gasoline," Darda said. "The good news is, we’ve been here before (after hurricanes Rita and Katrina in 2005), and it didn’t kill the economy. It’s not going to kill the economy now. Once people make the adjustment in their business plans and household expectations, it ceases to affect their outlook."