Image: Kenny Ely, Kenisha Ely
Steve Helber  /  AP
Kenny Eley fuels his car with his daughter Kenisha, 4, as they prepare for the Memorial Day weekend in Richmond, Va., Friday.
updated 5/27/2011 5:49:36 PM ET 2011-05-27T21:49:36

There's less money this summer for hotel rooms, surfboards and bathing suits. It's all going into the gas tank.

High prices at the pump are putting a squeeze on the family budget as the traditional summer driving season begins. For every $10 the typical household earns before taxes, almost a full dollar now goes toward gas, a 40 percent bigger bite than normal.

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Households spent an average of $369 on gas last month. In April 2009, they spent just $201. Families now spend more filling up than they spend on cars, clothes or recreation. Last year, they spent less on gasoline than each of those things.

Jeffrey Wayman of Cape Charles, Va., spent Friday riding his motorcycle to North Carolina's Outer Banks, a day trip with his wife. They decided to eat snacks in a gas station parking lot rather than buy lunch because rising fuel prices have eaten so much into their budget over the past year that they can't ride as frequently as they would like.

"We used to do it a lot more, but not as much now," he said. "You have to cut back when you have a $480 gas bill a month."

Story: How to save on $4 a gallon gas this summer

Alex Martinez, a senior at Arcadia High School outside Los Angeles, said his family's trips to San Francisco, which they usually take once or more a year, are on hold. As he stopped at a gas station to put $5 of fuel in his car — not much more than a gallon — he said the high prices are crimping social life for him and his friends.

"We're always worrying, 'How are we going to get home. We've got less than half a gallon left,'" Martinez said. "We definitely can't go out as much, and we can't go as far."

As Memorial Day weekend opens, the nationwide average for a gallon of unleaded is $3.81. Though prices have drifted lower in recent days, analysts expect average price for 2011 to come in higher than the previous record, $3.25 in 2008. A year ago, gas cost $2.76.

The squeeze is happening at a time when most people aren't getting raises, even as the economy recovers.

"These increases are not something consumers can shrug off," says James Hamilton, an economics professor at the University of California, San Diego, who studies gas prices. "It's a key part of the family budget."

The ramifications are far-reaching for an economy still struggling to gain momentum two years into a recovery. Economists say the gas squeeze makes people feel poorer than they actually are.

They're showing it by limiting spending far beyond the gas station. Wal-Mart recently blamed high gas prices for an eighth straight quarter of lower sales in the U.S. Target said gas prices were hurting sales of clothes.

Every 50-cent jump in the cost of gasoline takes $70 billion out of the U.S. economy over the course of a year, Hamilton says. That's about one half of one percent of gross domestic product.

The Commerce Department reported Friday that consumer spending rose just 0.1 percent in April, excluding the extra money spent on more expensive gas and food, while wages stayed flat for the second straight month.

Mike Nason, a marketing consultant from Laguna Niguel, Calif., says he's clipping coupons to save money for gas and cutting back wherever else he can. His daughter Chandler, 17, recently settled for a prom dress that cost $170 instead of asking her parents to spend $400 for another that caught her eye.

"In prior years we would have spent more money on the dress, but money has become a big object," he says.

Story: 9 great getaways to celebrate Memorial Day

The tourism industry is bracing for an uncertain summer. AAA predicts the typical family will spend $692 on its vacation, down 14 percent from $809 last year. Many of those surveyed said they are planning shorter trips and expect to pinch pennies when they arrive.

AAA estimates 34.9 million Americans will travel 50 miles or more from home this weekend, an increase of about 100,000 from last year. But they will have to do more complicated math to make the summer budget work.

The median household income in the U.S. before taxes is just below $50,000, or about $4,150 per month. The $369 that families spent last month on gas represented 8.9 percent of monthly household income, according to an analysis by Fred Rozell, retail pricing director at Oil Price Information Service. Since 2000, the average is about 5.7 percent. For the year, the figure is 7.9 percent.

Only twice before have Americans spent this much of their income on gas. In 1981, after the last oil crisis, Americans spent 8.8 percent of household income on gas. In July 2008, when oil price spiked, they spent 10.2 percent.

Average hourly earnings, meanwhile, have risen just 1.9 percent in the past year. That's only just enough to keep up with inflation.

The good news is that analysts expect gas to fall to $3.50 a gallon in the coming weeks. In order for household gasoline expenses to return to their historical place in the family budget for the year, gas prices would have to fall by about half and stay that way for the rest of the year.

Demand for gasoline has fallen for eight straight weeks as drivers try to cut back, but higher prices can't keep drivers parked for long. Even with high prices this year, the government expects gasoline demand to grow slightly for the year.

"Drivers try to do what they can, but they have to go almost all the places they go," says David Greene, a researcher at the Center of Transportation Analysis at Oak Ridge National Laboratory and manager of the Department of Energy website "There's no magic gizmo that will drastically change someone's gasoline use."

Mike Siroub clutched his heart as he described the experience of filling up lately. He owns a Union Oil gas station in Arcadia, Calif., but one of his cars is also a 1975 Oldsmobile.

"Think about it," he said. "If you've got a car with a 30-gallon tank and gas is $4 a gallon and you fill it up, you're out $120."

He says high gas prices will keep him home this weekend. And he runs a gas station for a living. As he greeted a steady stream of customers at his station, he laughed and said, "I have to pay for gas just like everyone else."

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Interactive: Pain at the pump


Video: Paying too much at the pump? Try these tips

  1. Closed captioning of: Paying too much at the pump? Try these tips

    >> very much. this morning on "today's consumer," we are talking about saving money on gasoline. the memorial day weekend kicks off the summer driving season. unfortunatelile gy gas prices are a dollar more per gallon than they were this year at the same time. kevin tibbless conducted an experiment to see if making little changes in the way you drive can save you big money .

    >> reporter: when i get behind the wheel i admit sometimes i'm an angel. and sometimes i'm not. go on, pass me. do it. turns out some of my bad habits are costing me money. to see how much i was wasting, i challenged myself to a little competition.

    >> reporter: driving two identical chevy cruises, i set out on the same 20-mile route from the leafy burbs to wrigley field in the heart of chicago . ready, set, go. but wait, how about a cup of joe for the road? did you know for every 15 minutes your car idles you burn a quarter of a gallon of gas so the $2 coffee just cost you $3. skip the drive-thru. you're better off parking and going in. okay. back on the road. i've got to get downtown. cruising speed, 70. but at 60, i can save four miles per gallon . at 50, another four miles per gallon . yeah, but i'm not that good. pedal to the metal . wait. traffic. this is chicago , after all. but when it comes to fuel efficiency , if you're hard on gas and hard on the brakes. [ tires screeching ]

    >> reporter: you will end up losing money. did i mention the junk in my trunk? yeah, that one. if you use your trunk as a storage unit you're wasting gas. for every 100 pounds of weight you reduce fuel efficiency by 2%. i'm cruising now and showing my support for the home team. turns out a third of the fuel is used to overcome wind resistance . even little flags have a big impact on efficiency. i make good time, but how about the mileage?

    >> 24 miles per gallon . that's not a lot.

    >> no. that's driving aggressively, going way over the speed limit . carrying extra weight and tire pressure down. absolutely, not the greatest.

    >> reporter: with the help of my pit crew , proper tire pressure , my load lighter, steady on the pedal and divine guidance to help me avoid my bad habits . just call me angel of the morning baby

    >> reporter: i took to the road a second time to see just how much gas i could save. this time, over 36 miles per gallon . that's a savings of $70 per month, $840 a year. that will get me three prime seats at wrigley. for "today," kevin tibbles, nbc news, chicago .

    >> today the federal government is unveiling new fuel economy labels you will see soon on new cars. ray la hood is the secretary of transportation. great to have you here. good morning. $3.81 is the average for a gallon of gas now. how much pressure on the administration to get it down?

    >> gas prices are killing family budgets. the president gets it. this is part of the president's plan -- the new label -- to help people save money at the pump. these gas prices are killing people. the president gets it. this is part of our plan here.

    >> this new sticker looks different. we'll see these on 2013 model years. jump in. tell me what's different about the label.

    >> it's easy to understand. it tells you immediately what kind of miles per gallon you will get, how much you will save over five years and the annual cost. you can quickly read if you have a smartphone, you click on this little thing here and you can also see how much you can save over a long period of time.

    >> you want consumers to make smarter choices.

    >> absolutely.

    >> this is the ford focus ?

    >> that's the focus.

    >> now a look at this car that's electric and gasoline, the chevy volt . look how it jumps up.

    >> absolutely. people are looking at opportunities for hybrid cars . the volt is a hot-selling car because people can save a lot of gasoline. this tells them the equivalent of using an electric powered car, how much they will save.

    >> how did the auto industry feel about this?

    >> they're coming along, matt. they understand people want to know how much they can save and they want to advertise that. these new stickerers really tell people quickly how much they are going to save. either electricity or on gasoline.

    >> when you look at the numbers, these are great. you want people to buy the cars. but when gas prices are higher there is interest in cars like these and when the price goes down the interest wanes?

    >> le while prices are as high as they are and with summer coming on we want people to have this opportunity. the president understands high gas prices are killing budgets. this is part of the president's plan to give people the option.

    >> and you will start to see these stickers on 2013 model year cars. thank you, mr. secretary. great to have you here. thank you very much.

    >> thank you.

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