Friday, May 25, 2007

$3.25 For A Gallon of Gas? Who Really Cares?

Gadabout doubts, very much, that current fuel costs are a hindrance to the economy. A critical look at the numbers does not add up to a crisis, as we are being told on the nightly news, and I am determined to expose this rouse.

First off, gasoline is cheaper today, adjusted for inflation, than previous historical highs. In other words, we have seen these prices before. Secondly, the ratio of fuel costs compared to household incomes is at near lows. This means we are making a lot more money today than at other times in the past when confronted with high gas prices, and therefore have extra funds available for discretionary spending. Lastly, we are driving vehicles that achieve greater fuel economy. Many may disagree with this last point, but if you take a look at your personal car ownership over the years, I think you’ll see my point.

Central to the points made above is the vivid, yet unnoticed, point that SUPPLIES are not in short demand. During the OPEC oil embargo of the 1970’s, the country was out of gas. There were long lines at the pump, closed gas stations and we were in a deep recession. It was a bad time in history. Conversely, today we have moderately high prices, but have plenty of supply. The country has a healthy strategic reserve, growing alternatives such as ethanol, and oil fields that are still ripe for harvesting. It has been said that we’ll run out of oxygen before the world runs out of oil. That point is up for debate.

If the average family consumes 30 gallons of gas a week, then that family is spending $30 per week more on gas today than last year. A carton of cigarettes costs over $30. A bottle of whiskey is $20. Two DVD’s at Target goes for over $30. Is there really a problem? Some very low income families may be faced with burdens if they were to lose $30 dollars of income—no doubt about it, but this is most likely a relatively small portion of the population.

Furthermore, many Americans live in big cities and rarely drive cars (if they even own a car)! There is a population trend back to urban and semi-urban areas occurring at this time in our history. The days of suburban lifestyles appears to have peaked, highlighting that many families are fatigued with long commutes and a lack of desired cultural activities. This trend will likely reduce fuel consumption in future years.

As far as holiday driving habits go, $3.25 per gallon gas will not affect planning. If a family plans a 1,500 mile round trip over an extended holiday weekend, 83 gallons would be burned (using an 18 mpg benchmark). That trip adds up to $270 for gas, and is only $83 dollars more than last year. If $83 is a showstopper for a vacation budget, it might be best to buy a case of beer, hotdogs, hamburgers, and just hangout at the homestead.


jimmy ray said...

I'm personally feeling the pinch, it cost a bunch to keep my 4 Mustangs, Diesl pickup, Crown Vic and the wife's Milan in fuel.....

I probly give up eatting

Gadabout Jack said...