Damn Gas Prices Hurt!
Damn Gas Prices Hurt!

Damn Gas Prices Hurt!

As Ben Bernanke aptly noted regarding the rising gasoline prices, it is a “very adverse development.”

Yes, it truly is an adverse development, Ben.  Could it get worse?  Yes, it is possible that gasoline prices could continue to escalate and, as I have pointed out in prior articles, the cumulative effect is staggering.  Food prices are starting to reflect a rise in price as the result of increased transportation costs.  As the good folks at Kroger noted the other day:  “we see a two percent (2%) grocery inflation in the weekly prices from our national suppliers and we plan to continue to pass this cost onto our shoppers.”

What makes gasoline prices hurt so much is that it affects tourism as well as all forms of travel.  The airlines are getting ready for “surcharge” on all flights and, like the government, once a tax or surcharge goes into effect, it seems as if it never comes off.  I am afraid that the infamous “staycation” is back as families that would have traveled to Disneyland or Northern Michigan may opt to stay at home and enjoy the old backyard and the barbeque.  This really hurts States like Michigan that depend upon tourism as a vital part of its projected revenue.

I feel sorry for anyone with a long commute to work.  In the past, there was an increased cost in fuel due more to actual usage than price, but what affected these folks the most was the time factor to travel the 40 or 50 miles one way to work.  Now the gas fill up really hurts and there seems to be no options in sight, short of working from home where you can.  I noticed also at the local gasoline station, people are buying a fixed amount of gas, say $20.00, rather than filling up at a much higher cost.

Restaurants are feeling the pinch and, short of offering “free food,” they are taking a big hit. This comes as the result of a decline in disposable income.  The family “economic pie” is just so big and the increased cost of gas has hit families hard and the result is less or very limited eating out.  I noted the other day that even barbers have been affected as people stretch haircuts a week or two more than in the past.  Some parents have opted to cut their children’s hair themselves to offset the cost of a haircut for two or three children.

When Wal-Mart complains about a decline in shoppers, you know things are tough.  Even the CEO of Wal-Mart commented “that shoppers are cutting back on clothing and other items as their spending power erodes.”  If gas goes to $5.00 a gallon or higher, I predict a major change for our society.   The urban sprawl that has been so common in years past will stop and we may see a return to the city both for families and businesses.  Hopefully, mass transit will be part of this change as well as real fuel efficiency, not the fractional gains in mileage that are so common now.  Going from 16 miles per gallon to 20 miles per gallon is an improvement, but we need to see fuel efficiency double and triple what we now experience.  If the cost of a gallon doubles, shouldn’t we expect to see our mileage double?

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Written by
Donald Wittmer