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Gas prices put a pinch on weekend travel

- The Washington Times - Thursday, May 22, 2008

With Memorial Day weekend plans crimped by sky-high gas prices and new airline fees, travelers could take some consolation yesterday from watching oil industry executives squirm as senators pummeled them with complaints about high gas prices, multibillion-dollar profits and their multimillion-dollar salaries.

"Where is the corporate conscience?" Sen. Richard J. Durbin, Illinois Democrat, asked the top executives of the five largest U.S. oil companies at a Senate hearing.

The executives were unapologetic, citing tight global supplies, little spare production capacity and vast areas of the U.S. that remain off-limits to drilling.

When prodded, two of the oil executives acknowledged earning more than $2 million a year. J. Stephen Simon said he made $12.5 million as senior vice president of Exxon Mobil Corp., which cleared $40.6 billion in profit last year. But two of the executives said they didn't know how much money they are making.

Americans of more modest incomes, meanwhile, are scaling back travel plans or just resigning themselves to stay at home as rapidly rising gas prices and a stalled economy threaten to hold Memorial Day travel to its slowest pace since 2002.

"I won't be traveling this weekend, and that's 90 percent due to gas prices," James Gram of Maryland said as he filled his tank at a Citgo station on New York Avenue in Northeast, where a gallon of regular gasoline cost $3.86 yesterday. "It was too much when gas was $3.50 and $3.60. There is no way I'm traveling now."

AAA Mid-Atlantic estimated that 640,300 people will travel 50 miles or more from the D.C. area this weekend, about 1 percent less than last year and a departure from the recent trend of annual increases. The largest decrease was among vacationers planning to travel by car, the AAA survey found.

About 16.5 percent of area travelers, or 105,800, are expected to travel by plane, which is consistent with last year's numbers.

Oil prices rose $4.19 yesterday to a record $133.17 a barrel, the largest one-day gain since March 26. A gallon of regular gasoline in the D.C. area costs $3.82 on average, slightly more than the national average of $3.79.

With $4 gas looming and further slowing of the economy expected, Americans are rethinking travel plans and looking for ways to reduce unnecessary spending.

"Now wherever I drive, I go much slower or try to drift behind cars in front of me," said Mr. Gram.

The last time Memorial Day travel decreased was after the Sept. 11, 2001, terrorist attacks.

"After 9/11, most of the hits came from the airline industry. You had the fear factor there," said AAA Mid-Atlantic spokesman John Townsend. "This time, you've got another drop and the airline industry is about the same, so the lion's share of the decrease is from people traveling by car."

The airline industry, meanwhile, is facing a fuel problem of its own.

American Airlines announced plans yesterday to charge domestic passengers $15 for the first checked bag and to increase a range of existing fees to help offset soaring jet fuel prices.

"The airline industry as it is constituted today was not built to withstand oil prices at $125 a barrel, and certainly not when record fuel expenses are coupled with a weak U.S. economy," said Gerard Arpey, chief executive officer of AMR Corp., parent company of American Airlines.

Industry observers were not surprised by the announcement, as airlines continue to seek ways to increase profitability.

"The announcement is simply a manifestation of the tremendous pressures the industry is feeling right now, particularly due to high fuel costs," said Elizabeth Merida, spokeswoman for the Air Transport Association (ATA) , a trade group that represents airlines. "We're seeing carriers unbundling their services in an effort to raise revenues."

Fuel makes up 30 percent to 50 percent of an airline's costs. Every penny increase in the price of a gallon of oil means $195 million in additional annual costs for the industry, according to the ATA, which expects passenger traffic to decline 1 percent this summer largely because of the sluggish economy.