Drop-Off In Driving To Undercut Economy

Americans drove 12.2 billion miles less in June than they did in the same month a year ago. That is a drop of almost 5%.

The fall-off in activity is likely to help gas prices move down, but it is also sure to undermine any recovery in the retail, auto, fast food, or hospitality industries.

The fresh argument is that driving less will bring gas prices back toward $3. But, oil is rising again, getting closer to $120 a barrel, so crude may offset the dying American habit of taking to the road.

Whatever direction gas prices go, several industries cannot recover if many fewer people put the key in the ignition.

The automotive industry is moving production to smaller cars, but if "miles driven" continue to fall, the replacement rate on vehicles will get worse even if the new chariots are more fuel-efficient. That stone in the water sends ripples to tires companies and auto parts suppliers.

The hotel and restaurant industries cannot make any progress if consumers will not race their engines. The margins on hotels were never terribly good. Falling occupancy will drive them into the red.

Fast food is almost entirely dependent on a restless public. Home-bound people eating TV dinners are a nightmare for that business.

And, owning a gas station is not what it used to be. Maybe that is why Exxon (XOM) dropped out of it.

Douglas A. McIntyre