The Effect of Gasoline Prices on College Students’ Expenditures

Meghan Alford
Sherri Farrell
Centearia Roby
Sheree Staples
Sheri Lokken Worthy*
Mississippi State University

Keywords: college student expenditures, gasoline prices


The purpose of this study was to analyze spending adjustments that have been made by college students due to changes in gas prices. The sample consisted of 28 males and 112 females ranging in age from 17 to 53 years. The college students in this sample travel less frequently and walk and carpool more often when gasoline prices are high. However, no notable changes were found in the areas of discretionary or non-discretionary spending by college students to accommodate for fluctuating gas prices. This finding may be explained by whether or not parents are contributing to the cost of college expenses.

“When Gallup asked Americans to name the most important financial problem facing your family today, they most frequently mentioned energy costs or gasoline prices” (Carroll, 2006a, p. 5). Low-income households and 18 to 34 year olds citied gas prices as the most important financial problem even more frequently (Carroll, 2006a). The changes in gasoline prices over the past few years have left many Americans wondering how to compensate for the variation and questioning whether there will ever be an end to the financial strain. Over the last couple years, a few researchers have studied what changes Americans are making to accommodate the fluctuating gasoline prices. The most common areas of study have been the effects of gasoline prices on discretionary spending, travel practices, essential spending, and trends in spending. Researchers have reported changes in Americans’ overall spending, but few have reported statistics dealing with specific areas of change. Due to the fact that most Americans cannot function without their cars (Mouawad, 2006), additional research is necessary to better understand the various effects fluctuating gasoline prices have on consumers.

Review of Literature

The specific changes in gasoline prices have been somewhat difficult to track. According to Carroll (2006b), gasoline prices were around $2.32 per gallon in August 2005. “This increased to a high of $3.03 per gallon following Hurricane Katrina last September and has fluctuated ever since, settling at the current nationwide average of $2.95 per gallon” (Carroll, 2006b, p. 2). However, gasoline prices have been declining during the months of September and October 2006. Because the gasoline prices are so inconsistent and Americans depend on automobiles for transportation, it is important to continue to consider the impact of gasoline prices on U.S. consumers. This leads to the research question for this study, “How have the inflated prices of gasoline impacted the individual’s management of resources?” The literature reviewed below will help to answer that question.

Discretionary Spending Related to Gas Prices

Discretionary spending has been commonly investigated in the literature related to gasoline spending. Many Americans are cutting back to compensate for fluctuating gas prices. One author stated, “Sixty-three percent say they have felt the need to reduce their personal discretionary spending as a result of the rise in energy prices” (Jacobe, 2006, p. 6). According to Saad (2006), instead of reducing miles driven, upper-income Americans were more likely to cut back on other forms of household spending compared to lower-income Americans. It seems that the reverse would be true, that lower-income Americans would be more likely to cut back on household spending. However, according to research by Saad (2006), that is not the case. Her data show that Americans are finding several ways to deal with the inconsistency in gasoline prices. According to Labbe (2006), one of the ways Americans are accommodating the fluctuating gas prices is to cut back spending on the purchase of goods and services. More specifically, Americans have decreased spending on non-essential items including clothing (Labbe, 2006).

Abu-Shalback Zid (2005) also supports the theory that Americans are cutting back on non-essentials. For example, many individuals reported not eating out as often. More clearly stated, when gasoline prices are high, individuals are eating at their homes instead of eating out (Deucy, 2006; McConville, 2006). Most research found that Americans were making some types of changes in their spending in response to higher gasoline prices.

However, most researchers did not report how individuals prioritize their spending trade-offs. Additional research is needed to conclude which areas of consumers’ budgets are most affected. There is a need to collect data on how individuals are changing their spending habits in the following areas: food away from home, food at home, recreation/entertainment, apparel, personal care, gifts, donations, education, and alcohol/tobacco.

Non-Discretionary Spending Due to Gasoline Prices

Another area of interest is how changing gasoline prices have impacted individuals’ spending on essential needs. Essential needs are considered to be those things that individuals cannot live without. These items might include things such as utilities, groceries, rent/housing expenses, and health care/medications (Duly, 2003). Most literature in this area is concentrated on driving habits and discretionary spending of individuals. Hobijn and Lagakos (2005) determined that, in practice, the demand for gasoline is rather inflexible and that “when the aggregate expenditure share of gasoline went up over the decade…consumers were hit more by gas prices than (was) reflected in the CPI” (p. 588). However, Abu-Shalback Zid (2005) did reference a change in non-discretionary spending. He reported that about one-sixth of Americans were reducing their grocery budgets to compensate for fluctuating gas prices and the need to travel. According to Jacobe, consumers reported cutting back on the use of air conditioning or heating in response to gasoline prices (2006). However, these were the only sources found that mentioned individuals changing their essential needs spending due to changing gas prices.

The lack of research on non-discretionary spending illustrates the need to continue research on the effect gasoline prices have regarding the money people spend to supply their most basic needs. Because many Americans react to change differently, it can be assumed that there are variations within individuals’ budgets that are impacted by the fluctuation of gasoline prices. More research needs to be done regarding individuals’ choices and changes with regard to essential needs. The areas that need to be considered are savings, utilities, groceries, rent/housing expenses, and health care/medications.

Changes in Travel Practices

The most commonly reported change was the change individuals made regarding their travel practices. When collecting research about how Americans are dealing with the fluctuating gas prices, the most frequent answer was to reduce the number of miles traveled. In three articles, authors specifically reported that individuals were driving less frequently (Abu-Shalback Zid, 2005; “Higher gas prices,” 2005; Mouawad, 2006). More specifically, Saad (2006, p. 1) stated, “cutting back on driving is particularly prevalent among lower-income Americans.” The cut-backs in driving were not solely dependent on the change in gasoline prices; the changes were also affected by the average income of the individual. According to the 2004 Consumer Expenditure Survey the percentage of income allocated for gas (and oil) is inversely proportional to income. For example, the less a person earns, the higher the percentage spent for gasoline (U.S. Department of Labor, 2004). Related to cutting back time on the road, the reduction of vacations came up in the research frequently. Jacobe (2006) reported that many Americans claim the second biggest cutback in their budgeting is reducing vacations. Also, Americans reported they were decreasing trips to visit friends and family (“Higher gas prices,” 2005). Saad (2006) studied how the availability of hybrid vehicles had impacted individuals. She reported that “57% of Americans would consider buying or leasing a hybrid car to replace a vehicle they now drive” (Saad, 2006, p. 2). She also stated that this research was not influenced by gender, but it was impacted by income and age.

Research also indicates that individuals have shifted away from the trend of buying the biggest SUVs (with poor gas mileage) and that hybrid vehicles (with much improved gas mileage) are in such high demand that there are waiting lists at dealerships (“Time to prepare,” 2004). Other changes made in traveling practices were to combine grocery trips for the month to avoid return trips (“Higher gas prices,” 2005) as well as to reduce the number of trips for non-essential items (Mouawad, 2006).

On the other hand, Mouawad reported that gasoline prices have not really affected our society. Mouawad stated, “Still, the biggest surprise so far is that high prices seem to have had little impact on driving habits” (Mouawad, 2006, p. C1). This is the only research found that disputed the change in individuals’ driving habits.

Regardless of the information collected, more research could be done in the area of driving practices. Additional information on what specific areas of travel have changed will add insight to the way individuals have adjusted. The areas of change that need to be studied more are vacations, weekend trips, errands, walking, biking, carpooling, and public transportation.

Age and Income

Some distinct trends were found in the literature that related to age and income. Carroll stated that about 20% of Americans say that the most important financial concern for them is gasoline prices (Carroll, 2006a). He also reported research that claims younger Americans (18-34) were the most likely to claim gasoline prices as the biggest financial concern (Carroll, 2006a). There was not any noticeable difference among higher-income and lower-income Americans when questioned about the most pressing financial issue (Carroll, 2006a).

Consumer Discomfort with Higher Gasoline Prices

In addition to the above reported research, there is discomfort with gas prices among many Americans. The most common concern was that fluctuating gasoline prices were having a major financial impact on the U.S. economy (Jacobe, 2006). The economy’s gasoline burden trickles down to adversely affect the individuals of this society. Jacobe (2006) reported that more than half of Americans claimed that the fluctuating gasoline prices were causing them financial hardship. Regardless of what Americans are reporting, Jacobe stated that if gasoline prices continue to remain at three dollars a gallon or more, individuals will be forced to change their spending habits (Jacobe, 2006).


The research summarized above led to the conclusion that regardless of what Americans report they are doing, they have already begun changing their spending habits. It is reported that high gasoline prices are placing a significant strain on family budgets and also affecting businesses (Greason, 2005). Because of this, if individuals have not already made decisions about budgeting, they will soon be forced to do so if gasoline prices remain high. Although some research is available, recent research that examines the relationships between fluctuating gasoline prices and (a) discretionary spending, (b) essential needs spending, and (c) travel practices is limited. Further research is warranted in order to ascertain more clearly the definitive relationships.


Since Carroll (2006a) found that younger Americans were more likely to be affected by fluctuating gasoline prices, the researchers used college students as the sample for this research. The following hypotheses were presented:

H1: College students allocate their discretionary income differently due to increased gasoline prices.

H2: Increased gas prices have not impacted the college student’s budget regarding essential needs.

H3: College students will travel less frequently when gasoline prices are high.


The questionnaire for this study was completed by Mississippi State University (MSU) students enrolled in a nutrition course during the fall semester of 2006. The purpose of the questionnaire was to gather information from college students regarding various resource management issues that affect families.

The participants in this study were MSU students in two sections of the class, Individual and Family Nutrition, who were present on the day the survey was distributed. Data were collected on November 7 th and 8 th, 2006. There were a total of 191 students enrolled in these two sections. Students who were concurrently enrolled in Family Resource Management (the course for which this research project was assigned) did not participate. A total of 140 students completed the questionnaire.

During the first ten minutes of class, a simple oral explanation of the consent form, purpose of the study, and written survey was presented to the students. It was explained that participating in this survey was strictly voluntary and students were then asked to listen as the informed consent form was read aloud. In order to assure anonymity, the students were not required to sign the informed consent. Those who were interested in participating were asked to take a packet containing the informed consent form as well as the survey. The informed consent form included all pertinent information such as contact information, purpose of the study, risks and benefits, confidentiality, voluntary/non-participation codicil, investigator signature, and date. Participants were given a copy of the Informed Consent for their records. Those who chose not to participate were asked to wait quietly while the participants completed their surveys. Upon completion of the surveys, participants raised their hands and their packets were collected.

The survey instrument contained 21 written questions that primarily required simple “choose one best answer for each question” responses. Participants were asked to choose the answers that most closely reflected changes in their personal situations with regard to spending choices, traveling practices, and gas usage in relation to fluctuating gas prices. The first question asked how spending had changed with regard to 11 discretionary expenditures in response to fluctuating gas prices. The second question asked how seven 7 traveling practices had changed in response to fluctuating gas prices. These questions utilized a likert scale of seven choices ranging from 1 = “no change” to 7 = “significant change”. Another question asked about whether the student had purchased a more fuel-efficient vehicle. The last two questions asked if work/school commutes and schedules had changed to accommodate fluctuating gas prices. The questionnaire also included questions about demographic characteristics of the respondents. The survey instrument was approved by the Institutional Review Board for the Protection of Human Subjects in Research (IRB), at MSU on October 27, 2006 (IRB Docket # 06-272).


The sample consisted of 28 males (20%) and 112 females (80%), ranging in age from 17 to 53 years. The living arrangements among participants included single households (89.3%), married households (5.0%), and other (5.7%) arrangements such as living with parents. The ethnic groups consisted mainly of Caucasian (70.0%) and African American (27.9%) participants. The participants’ family gross annual incomes ranged from 0.8% earning $10,000 or less to 20.8% earning $100,000 or more. Of those that completed the survey, 62.4% of participants had family gross annual incomes of $50,000 or more. After collecting and analyzing the completed surveys, the following results were found.

The first hypothesis for this study was college students allocate their discretionary income differently due to increased gasoline prices. With regard to changes in discretionary spending, slight changes were found among college students. The questionnaire asked the participants to rank their changes on a likert scale from 1 to 7, with 1 = “no change” and 7 = “significant change.” Discretionary income was divided into seven categories: meals away from home, recreation/entertainment, clothing, personal care, gifts, donations, and savings contributions. The mean changes in each category are listed in Table 1.

Table 1

Mean Changes in Discretionary Spending

Spending Category

Mean Change


Recreation/ entertainment


Minimal change

Meals way from home


Minimal change



Minimal change



No change



No change



No change

Personal care


No change


The second hypothesis for this study was increased gas prices have not impacted the college student’s budget regarding essential needs. As predicted, relatively little change was found in any of the non-discretionary spending areas. Respondents were asked to rank their responses to fluctuating gas prices. In this question, 1 = “no change” and 7 = “significant change.” Non-discretionary spending was broken into four categories: utilities, groceries, rent/housing expenses, and health care/medications. The mean changes are listed below in Table 2.

Table 2

Mean Changes in Non-Discretionary Spending

Spending Areas

Mean Change




No change



No change

Rent/Housing Expenses


No change

Health Care/Medications


No change


The third hypothesis for this study was college students will travel less frequently when gasoline prices are high. Some changes were found in students’ travel behaviors. The respondents were asked to rank their changes in traveling practices from 1 to 7 where 1 = “less frequent,” 3 and 4 = “no change,” and 7 = “more frequent.” The travel category was divided into seven areas: vacations, weekend trips, errands, walking, biking, carpooling, and public transportation. The mean changes are recorded below in Table 3.

Table 3

Changes in Travel Frequency

Areas of Travel

Mean Change


Weekend Trips


Slight decrease



Slight decrease



No change



No change

Public Transportation


No change



Slight change



Slight increase


Three additional areas of interest were investigated on the survey: fuel efficient vehicles, changes in commute, and changes in work/school schedule. Results indicated that ten percent of respondents have purchased a more fuel-efficient vehicle due to fluctuating gas prices and 31.4% have considered doing so. Approximately 31% of respondents have changed their commute to school and/or work and 30% have changed their work/school schedule due to fluctuating gas prices.


Significant changes were expected in the areas of discretionary spending and travel practices due to the fluctuating gas prices. However, only minimal changes in some of the areas of discretionary spending were found. College students in this sample had also changed some of their travel practices to accommodate fluctuating gas prices. Students reported taking less weekend trips and vacations and reported walking and carpooling slightly more frequently.

More research is needed in this area to sufficiently describe the affect of gasoline prices on individuals’ spending practices. In particular, data should be analyzed with regard to gross annual income and where college student income originates (for example from parents or employment). Additional studies should be conducted to analyze results with regard to these issues. Also, it would be beneficial to perform this same study in a more generalized adult population.


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