The Effects of Energy Availability and Costs on Consumer Attitudes and Behavior

Harry W. O'Neill, Opinion Research Corporation
[ to cite ]:
Harry W. O'Neill (1975) ,"The Effects of Energy Availability and Costs on Consumer Attitudes and Behavior", in NA - Advances in Consumer Research Volume 02, eds. Mary Jane Schlinger, Ann Abor, MI : Association for Consumer Research, Pages: 863-878.

Advances in Consumer Research Volume 2, 1975      Pages 863-878

THE EFFECTS OF ENERGY AVAILABILITY AND COSTS ON CONSUMER ATTITUDES AND BEHAVIOR

Harry W. O'Neill, Opinion Research Corporation

Since January of this year, Opinion Research Corporation has been conducting a research program to identify and monitor changes in attitude and behavior resulting from the energy shortage and rising energy costs. The research is nationwide in scope and conducted by way of telephone interviews. Initially, 400 interviews were conducted for each wave of the program -- a wave being a two-week period. Since the middle of August, the number of interviews has been increased to 600 per wave. This paper presents some of the findings from this research Program.

Looking at the energy shortage overall, notice that the latest findings at the right of the chart show that the percentage of the public who believe the energy shortage is very serious is about twice the percentage who believe it is not serious at all -- 34% vs. 18%. Back in June, July, and August of this year, the two groups were about equal -- about a fourth of the public believing the energy shortage is very serious and a fourth believing it's not too serious. When the lines at gas stations started to disappear -- back around March -there was a considerably higher proportion of the public who felt the energy shortage wasn't serious. But as people have seen gas prices climb -- even though there has been no problem with availability -- there has been a decided drop-off in the number of people saving the shortage is not serious.

TABLE

THE ENERGY SHORTAGE IS...

We have been asking people whether they believe the energy shortage will last only a few months, a year or two, or a long time. As you can see, only about one person in ten believes the energy shortage will be over within a few months, and another fourth hold that the shortage will last a year or two.

TABLE

ENERGY SHORTAGE WILL LAST...

On balance, people believe that the energy shortage will be with us for a long time. And the proportion of the public who hold this point of view has been steadily increasing since January. Today, about half the public believes that the energy shortage is not a short-term phenomenon.

TABLE

ENERGY SHORTAGE WILL LAST A LONG TIME

It is virtually impossible to separate attitudes and behavior related to the energy shortage from those related to inflation. Both of these problems are having a profound impact on our whole way of life. In a sense, double-digit inflation is moving us from an economy of more and more to an economy of less and less -- from an impulse buying economy to an economy of selective purchasing. The importance of these emerging trends resides in the fact that they may well be destined to have a significant impact on the kinds of products and services marketers can expect to sell in the future.

The percentage of people who say they have been hurt by inflation has reached an all-time high. Almost nine persons in ten report they are feeling the bite of inflation -- up sharply from 1966.

TABLE

HURT BY INFLATION

Furthermore, seven people out of ten report that their income has not kept up with rising prices. Only a fourth are in the fortunate position of staying even or a bit ahead.

TABLE

INCOME VS. RISING PRICES

And it isn't just the people in the low-income brackets. Here are the same data shown by level of income. You can see that even those in the higher income brackets say that they are falling behind. Obviously, there is a relationship with income -- but 54% of the people with family incomes of $15,000 or over say that their income has not kept up, while only about a third say their income has kept up.

TABLE

INCOME VS. RISING PRICES BY FAMILY INCOME

                      Income Has Kept Up    Income Has Not Kept Up

Under $5,000            9%                                     83

$5,000-$6,999        22%                                     71

$7,000-$9,999        17%                                     79

$10,000-$14,999    28%                                     66

$15,000 or over       35%                                     54

                                    (Apr.'74)

When people are asked to look ahead to next year and predict what will happen to their family income relative to prices, over four persons in ten believe their income will fall behind while half expect to stay about even or perhaps have their income increase a bit relative to prices.

TABLE

FAMILY INCOME RELATIVE TO PRICES

Increase more      12%

Stay about even    38

Fall behind           43

No opinion            7

          (Oct. '74)

All of this, of course, is reflected ln how people shop. We have been monitoring since 1968 whether rising prices affect shopping habits. You can see continuous movement upward to the present time, where seven Americans in ten report that rising prices, indeed, have caused them to change their shopping habits.

When people are asked what specific changes have occurred in their shopping habits because of inflation, five behaviors are mentioned by about half or more of the Public:

There is an increase in shopping at more than one store in an effort to obtain the best Price.

There is more buying of store brands rather than national brands.

There is an increase in the purchase of larger economy-size packages.

There is an increase in the shopping at discount stores.

There is more payment in cash rather than by charge account.

TABLE

RISING PRICES CHANGED SHOPPING HABITS

All in all, higher prices are having an important impact on the perceived value of key goods and services -- a few of which are shown here. For a whole range of products and services, people were asked which they believe are providing them with the least value for the money spent. Note that in the case of gasoline, there is a 26 percentage point difference between the current results and those for 1968. Of all the products and services evaluated, gasoline showed the greatest change in terms of least value.

TABLE

LEAST VALUE FOR THE MONEY

Most people report having been personally affected to some degree by the energy shortage; and as the price of various forms of energy has increased, the number of people reporting being personally affected a great deal has been trending up.

TABLE

PERSONALLY AFFECTED BY ENERGY SHORTAGE...

                  March     July     Sept.

Great deal    15%     20%     22%

Some           34         31        35

Only a little   34        32         26

Not at all      17         16        17

Very few people report experiencing any difficulty in buying gasoline. There is no problem with availabilitY.

TABLE

DIFFICULTY IN BUYING GASOLINE

                    March     Oct.

Great deal        9%      0%

Some              19         3

Very little       22         5

None              49       90

However, cost is now an important factor. Back in March, about two-thirds of the public reported that price was not a factor in their purchase of gasoline. Today, about half the public say it is a factor and they are looking around for the lowest Price available.

TABLE

LOOKED AROUND FOR LOWEST PRICE LAST TIME BOUGHT GAS

                            March      July    Oct.

Looked around      33%       51%   49%

Price not a factor    65          48      47

People find it hard to accept what has been a steady increase in gasoline prices; and six persons in ten are of the opinion that, compared to most other things they have to buy, they find the price of gasoline to be unreasonable. As a result, the public is rather unsympathetic to the supposed problems of the oil industry.

TABLE

PRICE OF GASOLINE COMPARED TO OTHER THINGS

Unreasonable     60%

Reasonable        38

No opinion          2

       (Oct. '74)

Not only do people feel that the price of gasoline is unreasonable, but very few expect any decrease in price in the near future. As a matter of fact, more people believe the price will go up than believe it will remain at its current level.

TABLE

OVER NEXT THREE MONTHS, PRICE OF GASOLINE WILL...

Increase         43%

Not change    38

Decrease       10

Don't know     9

    (Oct. '74)

Six persons in ten report that they are now using their car less because of the price of gasoline.

TABLE

USING CAR LESS BECAUSE OF PRICE OF GASOLINE...

Yes                 60%

No                  37

Don't know       3

    (Oct. '74)

And two-thirds say that if the price were to reach 704 a gallon there would be even a further decrease in their driving.

TABLE

AT 704 PER GALLON...

                                             June        Oct.

Would decrease my driving    75%        69%

Would not                              21           25

Not sure                                  4              6

The energy situation has always been rather confusing to the public. People have never been sure where to put the blame. Oil companies, however, consistently have been named more often than any other group or institution as being most responsible for the shortage.

TABLE

MOST RESPONSIBLE FOR ENERGY SHORTAGE

                                            Jan.       Sept.

Oil companies/oil industry      29%     26%

Federal government               19         11

President Nixon                     14           8

Everyone                               10         12

Public/consumers                     7          11

Bug business/business leaders   4         11

All others                                15         23

Don't know/no opinion            15         19

In general, the public is dissatisfied with public, business, and governmental efforts to relieve the energy shortage. Furthermore, public dissatisfaction is increasing. And, on this issue, the honeymoon period for President Ford is over. In our latest measurement, nearly half the public say they are not satisfied with his efforts regarding the energy situation. A month before, only 25% of the public expressed dissatisfaction.

TABLE

NOT SATISFIED WITH STEPS TO RELIEVE ENERGY SHORTAGE TAKEN BY...

                        April         Oct.

Oil companies    57%      63%

Nixon/Ford        51%       46%

Congress             41%      56%

Auto companies  37%     48%

Public                 19%      36%

Since the advent of the energy shortage as a major public issue, oil companies have been devoting a considerable amount of effort to advertising that discusses the energy shortage, its causes, and what they as companies are doing about it. About six persons in ten report being aware of such oil company advertising.

TABLE

AWARE OR NOT AWARE OF OIL COMPANY ADVERTISING ABOUT ENERGY SHORTAGE AND WHAT THEY ARE DOING ABOUT IT

Aware          58%

Not aware    42

    (Sept. '74)

Of these people, just over half say they find the advertising to be believable -- but a rather large 45% are not convinced.

TABLE

BELIEVABILITY OF OIL COMPANY ADVERTISING

The public is not in the mood to be a friend of the oil companies, particularly as the companies report increasing profit levels. Eighty percent of the public supports the notion that the federal government should put a limit on oil company profits, even when the no-limit alternative is phrased in terms of encouraging increased production.

TABLE

OIL COMPANY PROFITS

Put federal limit on oil company profits                                                              80%

Allow oil companies to make all they can to encourage increased production     13

No opinion                                                                                                        7

     (Sept. '74)

It has been difficult for the public to accept the energy shortage as something that has not been, at least in part, contrived by business. Although more people today than several months ago believe the shortage is real, over half the public believe that the situation has been and still is contrived to at least some extent.

Of course, even many experts -- self-appointed and otherwise -- have publicly disagreed as to the seriousness and reality of the shortage. Ralph Nader, on the one hand, has been saying all along that we are drowning in a sea of oil. On the other hand, an official of the American Association for the Advancement of Science has said, "America's energy problems are real, serious, and enduring despite the popular belief that the difficulties vanished with the end of the Arab oil boycott.

TABLE

BELIEVE ENERGY SHORTAGE IS...

                      April '74    Sept. '74

Real                  25%            35%

Contrived          43               38

Some of both     23               20

Whether they believe it real or contrived, very few people expect the energy shortage to become less severe over the next few months, and almost four persons in ten are anticipating an increased problem.

TABLE

EXPECT ENERGY SHORTAGE OVER NEXT FEW MONTHS TO BECOME...

                    March '74    June '74    Oct. '74

More severe    11%             27%           38%

Less severe      36                11                5

Same as now    48                59              52

There are a whole host of possible actions or policies that might be undertaken to help solve or lessen the energy shortage. We have measured public favor for or opposition to 24 such actions or policies.

Actions that relate to providing increased information enabling the consumer to conserve energy usage are favored by a very large proportion of the public.

TABLE

CONSUMER INFORMATION

                                                                    Favor     Oppose

Oil industry inform on energy conservation       88%          8

Appliance manufacturers                                  86%         11

Federal gov't inform on energy conservation     84%         14

     (Oct. '74)

Actions that would have a direct effect on consumer behavior receive mixed reaction. Actions that are not particularly limiting of behavior, such as requiring people to save materials for recycling and having a nationwide speed limit of 55 mph, receive the approval of the large majority of the public. However, actions that would have a more drastic effect on people's behavior, such as the regulation of energy use and the rationing of gasoline, do not go over particularly well.

TABLE

ACTIONS AFFECTING CONSUMER BEHAVIOR

                                                            Favor      Oppose

Require saving materials for recycling      88%          9

Nationwide maximum                              76%        23

Regulate energy use                                 42%        49

Ration gasoline                                        16%        80

     (Oct. '74)

By and large, large majorities of the public approve of efforts to develop more energy sources, such as greater involvement of the federal government in developing new sources of energy, increased off-shore drilling, the building of more nuclear power plants, and government involvement in the increased exploration for oil. On the issue of tax incentives for oil companies to encourage increased production and exploration, public opinion is divided, with somewhat more opposition than favor.

TABLE

ENERGY DEVELOPMENT

                                                                                Favor       Oppose

Federal gov't develop new sources of energy               82%           10

More offshore drilling                                                  74%           16

More nuclear power plants                                          66%           24

Federal gov't explore for oil                                         65%           25

Tax incentives to increase production and exploration   40%           50

        (Oct. '74)

With respect to the easing of pollution controls to help alleviate the energy shortage, public opinion is rather divided:

On balance, the public approves of the removal of off-shore drilling restrictions.

Public opinion is evenly divided on the suspension of auto emission controls.

There is more opposition than favor, however, for the removal of strip mining restrictions and, particularly, for the removal of oil refinery pollution controls.

TABLE

POLLUTION CONTROLS

                                                           Favor      Oppose

Remove offshore drilling restrictions      47%          40

Suspend auto emission controls             45%          44

Remove strip mining restrictions            32%           46

Remove oil refinery pollution controls   25%           67

        (Oct. '74)

People also have mixed emotions about using taxes to control energy usage. There is slightly more opposition than favor to two suggested approaches -namely, taxing large cars that get low mileage and taxing auto features (such as air conditioners ) that decrease gas mileage.

TABLE

TAXES TO CONTROL USAGE

                                                                          Favor      Oppose

Tax on auto features that decrease gas mileage    45%           50

Tax on large cars that get low gas mileage            43%           49

    (Oct. '74)

Opposition is great to actions that use price increases as a means of controlling energy usage. People overwhelmingly reject higher electric rates for peak-hour usage and increased gasoline prices to reduce consumption.

TABLE

PRICE TO CONTROL USAGE

                                                                          Favor      Oppose

Higher electric rates during peak hours                  28%           68

Increase gas prices to reduce consumption           19%           77

    (Oct. '74)

There is considerable support for increased federal spending on mass transportation and majority support for increasing the amount of foreign oil imports. There is more favor than opposition for the federal government becoming involved in the regulation of energy production, although this favor is barely at the majority level. And the notion of all-year Daylight Savings Time has never particularly stirred the public.

TABLE

MISCELLANEOUS ACTIONS

                                                                Favor         Oppose

Federal spending on mass transit                 79%             17

More foreign oil imports                             54%              38

Federal gov't regulate energy production    49%              38

All year D. S. T.                                         41%              53

    (Oct. '74)

Most Americans -- 87% -- claim to be making some effort to save energy.

TABLE

EFFORT MADE TO SAVE ENERGY...

Great deal        36%

Fair amount      51

Very little         10

None                 3

    (Oct. '74)

As shown here, one of the reasons that many people are making an effort to save energy is because they believe individual efforts do have an impact on total consumption. People also are making additional efforts today to save energy because of the rising prices.

TABLE

IMPACT OF PERSONAL CONSERVATION ON TOTAL CONSUMPTION

Great deal      34%

Fair amount    38

Very little        19

None                4

Don't know       5

    (Oct. '74)

In our most recent survey, people report doing the following things to save energy:

Two-thirds say they are using fewer lights.

About half say they are using appliances less often. During the summer months there was a sharper rise in this kind of behavior due primarily to claimed reductions in air conditioning usage.

And about one person in eight claims to have postponed or canceled an appliance purchase because of the energy shortage.

TABLE

BECAUSE OF ENERGY SHORTAGE...

Use fewer lights                                             67%

Use appliances less often                               48%

Postponed or canceled appliance purchase    13%

    (Oct. '74)

Over eight people in ten say they are driving slower in order to conserve energy. As mentioned before, the primary component in this behavior is now cost rather than availability.

TABLE

DRIVING SLOWER --

Yes    84%

No     16

(Oct. '74)

Changes in shopping behavior may be one of the permanent results of the energy shortage. What we have seen since January is a fairly significant proportion of the public claiming to have changed some of their shopping patterns, and the proportion claiming to have changed has held up -- even increased -over the months.

Over seven persons in ten say that they shop more at stores close to home or work than they did before. Two-thirds say that they shop at fewer stores or fewer locations in order to conserve energy. Six consumers in ten say they are shopping less often. And just over half report a reduction in window shopping.

TABLE

SHOPPING CHANGES DUE TO ENERGY SHORTAGE

                                                                            June      Latest

Shopping more at stores close to home or work     63%       72%

Shopping at fewer sotres or locations                     55%       68%

Shopping less often                                                53%       60%

Cutting down on "window shopping"                      50%       54%

    (Sept. '74)

One aspect of the energy shortage has been the rather sharp rise in electric rates over the past year. As shown here, large majorities of the public throughout the country testify to these increases. And very few people expect the situation to change in the near future.

TABLE

ELECTRIC RATES IN PAST YEAR...

                  Total     East    Midwest    South     West

Increased    74%    72%     66%          79%       78%

Decreased     1          1          0                1           1

No change   12       12        16              10            8

Don't know    8          6       13                6            8

    (Oct. '74)

Over half the public reports that they are using less electricity today because of the cost.

TABLE

USING LESS ELECTRICITY BECAUSE OF COST...

Yes                 55%

No                  40

Don't know       5

    (Oct. '74)

IMPLICATIONS

Over the long run in a market economy, price and availability are inextricably intertwined. The impact of this relationship is now being felt in a direct way by the public; and, as a result, their attitudes and behavior appear to be undergoing a slow but long-term shift. The potential implications of this shift are widespread and far from totally clear at this time. Among some of the areas that may well be impacted are these:

The generation of electricity -- There is the potential for increased movement to public ownership of electric utilities as a result of rapidly rising costs. Just recently in Massena, New York, it was voted upon to buy out Niagara Mohawk.

The pricing of electricity -- Over the long term, it may be necessary to price electricity in a manner similar to toll telephone charges -- i.e., higher prices during periods of peak usage in an attempt to smooth demand and lower costs.

Oil and automobile taxes -- There has been an increase in public demand for the elimination of the oil depletion allowance that seems to be tied to public dissatisfaction with the level of oil company profits. With respect to taxes on larger automobiles, there is considerable public opposition at the present time. However, the long-term potential for public support in this area should not be written off, as the desire for larger cars certainly will be impacted by their upkeep costs.

The warm, snug house -- The sharp rises in the price of fuel oil have made home heating a much higher proportion of total housing costs. In the Northeast, for instance, heating oil rises have eclipsed real estate tax rises as a prime component in the inflation of housing costs. The result is a substantial growth in the desire for "warm, snug houses" with resulting impact on the markets for everything from draperies and insulation to the houses themselves. Attached houses, in particular, which have been relatively successful in the last few years in reaction to land costs, are relatively much cheaper to heat and presumably more desirable.

Mass transit -- There is growing public support for increased federal funds to be spent in the area of mass transit. Public demand for and usage of mass transit should be followed closely because of the obvious impacts that increased mass transit demand would have on a large number of policies and markets.

The credibility of business -- In today's adverse business climate, where the credibility of most major institutions is at a low point, the public's growing skepticism about the actual nature of the energy crisis and the role of the oil industry in it could create a backlash against all business. In fact, the questions raised by the energy crisis may well intensify the public's growing criticism of what it considers to be the concentrated economic power, excessive profits, and impersonality of large companies. The explosive quality of the crisis is indicated by the way the public feels that, either voluntarily or under pressure, it's bearing the brunt of the shortage while those in power have not fully carried out their responsibilities to alleviate the situation.

----------------------------------------