Tuesday, March 11, 2008

Gasoline - The Difference A Dollar Makes

Gasoline - The Difference A Dollar Makes

Gasoline Prices Expected To Increase To $4.00/Gallon in U.S.

For millions of upper middle class, and upper class U.S. consumers tacking on an extra dollar per gallon to the price of gasoline is no big deal, however, to the millions of working Americans who live from paycheck to paycheck the recent increase spells for financial hardship.

I can only speak from my own experience, and so I will.

I recently purchased an SUV. The SUV's gas tank has a capacity of 22 gallons. I fill the tank up twice a month. Adding one dollar to the price of a gallon of gasoline works out to a $44 per month increase in gasoline cost for our SUV.

We also own a coupe which tops off at 17 gallons per tank, and that tank is also filled up twice per month. Adding one dollar to the price of a gallon of gasoline works out to a $34 per month increase in gasoline cost for our Coupe.

That sums to an increase of $78 per month to purchase the same gasoline with no added benefit.

The Cost Of Everything Is On The Rise

Everything Else

A one dollar increase in the price of gallon of gasoline will effectively raise the price of everything else. Food prices are already on the rise. Inflation driven by higher energy cost will increase the cost of every good, and every service. Even when products aren't made with oil the price of oil will in some way effect the cost of that product. The cost of services are also effected directly, and indirectly by the cost of oil.

I'm not an economist but I'd guess that the indirect effects of a dollar increase on a gallon of gasoline would have an effect similar to the direct effect that increase creates. Using my estimate of the impact a dollar increase on gasoline I'm assuming that such an increase will drive up cost for everything else. I'm adding an additional charge of $78 per month in expenses for everything else.

Adding these cost together we come to an additional cost of $156 per month.

To net that $156 I have to gross about $177 dollars.

For millions of upper middle class, and upper class U.S. consumers $156 per month is a paltry amount - perhaps a night out on the town - nothing to become concerned about.

However, for tens of millions of wage earners added monthly cost of $156 take home represents several years of pay raises. For these earners a one dollar increase in the price of gasoline eliminates income increases designed to counter the effect of inflation which took them several years of hard work to earn.

While upper middle class, and upper class Americans will chuckle at a one dollar increase in the price of a gallon of gasoline tens of millions of American families will be forced to find ways to survive.

Many American families live at the very brink of self sufficiency, barely keeping up with their bills from month to month. The question is then, how do these tens of millions of working American families survive?

Cutting Back

Expect millions of Americans to cut back on purchases of every kind. For those who could afford a night out on the town on occasion it now becomes a rarity. For those who could barely afford a night out it now becomes impossible. For those who already could not afford going out to a restaurant or going to see a movie these people may find themselves seeking assistance from charities for food and clothing even though they work.

Finding Second Jobs

Millions of Americans already work two, and even three jobs, we should expect to see an increase in the number of American workers who must work several jobs in order to survive.

The Coming Recession

As the price of gasoline and everyday items increases consumers will be forced to cut back their purchases of goods and services. Slowly, but surely the effect of decreased consumer activity will lead to drops in profits for employers, which will in turn lead to workforce reductions.

As unemployment increases the vicious downward cycle will begin in the U.S. economy - an economy based upon imported inexpensive light crude oil.

For European Readers

You surely must be envious of our low gas prices, but remember that Americans drive much larger and less efficient automobiles. Also note that Americans commute a longer distance going between work, and home. Remember that mass transit systems in the U.S. are crude in comparison to those available in Europe. Americans are trapped through years of poor decisions, and short sighted greed, into maintaining a dependence upon large inefficient automobiles.

Also remember that Americans have little in the way of a social safety net. People are enslaved to their jobs to maintain their health care, if they even have it, and ultimately will pay whatever is asked for gasoline just so that they can keep their jobs.

Remember too my European readers that American's have extremely corrupt State and Federal representation that take bribes, and payoffs from the oil industry. Gasoline prices are increasing in the U.S. not because taxes are being increased to fund mass transit systems, or to pay for tax breaks for fuel efficient automobiles - no, the price of gasoline is rising in the U.S. because gasoline is subject to speculation, and the corrupt representatives of the people have turned a blind eye to the illegal price fixing that takes place within the oil, and gasoline distribution system.

Available Soon - The 125 Mile Per Gallon Plug In Prius

Possible Solutions

Decreasing cost will become important. Buying fuel efficient automobiles will help keep slow the increase in gasoline, but shifting to alternative fuels will be the only true long term solution. Unfortunately, a shift to more fuel efficient automobiles will take years, and shifting to alternative fuels will take decades. A change away from fossil fuels will take more than time, it will demand a government not completely controlled by Big Oil. Is this even possible? Unlikely in the near term, but an eventuality in the long term.


ANNA-LYS said...

I will like to thank You for Your thoughtful input upon "blogg-presence"!

// AnnA

FANCY said...

Everything is not the future and dollar can change into baht...*LOL*...that will be that day...;-)

Anonymous said...

I thought Bush declared that we're living in God's country, and it is God's given right to be wasteful - no sacrifice is necessary. Bush also claimed that he talks to God daily. Now I wonder if God tried to trick him. It's unfortunately that American lazy butts are too fat to be "comfortable" inside a compact car. They all want to have the feeling of sitting in a sofa cruising at high speed. Here in the great red right wing state of Kansas, almost everyone is beer belly, chunky and either driving a big SUV or a big pickup. Bush's words are still the gospel to live by.

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