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So driving by the local gas station I saw gas was $3.69/gallon. I have to admit this is a bit of a psychological barrier for me, and even more so as it creeps toward $4/gal.
At around that mark I am starting to "clench up", in terms of my spending. No, the extra $50/month extra over $3.00 or so isn't breaking the bank, however I think it's more reactionary. Also, in 2008 when oil prices went this high my own company was starting to really feel the effects as well as my industry (airlines). I am not in danger of losing my job today but possibly in the future as the airlines are slowly bled dry if they can't continue to increase ticket prices. Also, higher ticket costs means reduced demand, and a cut in aircraft which means less employees at said airline. Not a good combo for me.
So, with that being said I went on a pretty big buying binge over the last 4-6 months or so as the economy improved and my income increased significantly working more hours. That buying binge has officially come to a close and I have to wonder if this is going to be repeated through households over the entire US.
Will $4/gal gas make people tighten up to the point of strangling our economy? And should we be thinking about selling off our investments and going to all cash?
So driving by the local gas station I saw gas was $3.69/gallon. I have to admit this is a bit of a psychological barrier for me, and even more so as it creeps toward $4/gal.
At around that mark I am starting to "clench up", in terms of my spending. No, the extra $50/month extra over $3.00 or so isn't breaking the bank, however I think it's more reactionary. Also, in 2008 when oil prices went this high my own company was starting to really feel the effects as well as my industry (airlines). I am not in danger of losing my job today but possibly in the future as the airlines are slowly bled dry if they can't continue to increase ticket prices. Also, higher ticket costs means reduced demand, and a cut in aircraft which means less employees at said airline. Not a good combo for me.
So, with that being said I went on a pretty big buying binge over the last 4-6 months or so as the economy improved and my income increased significantly working more hours. That buying binge has officially come to a close and I have to wonder if this is going to be repeated through households over the entire US.
Will $4/gal gas make people tighten up to the point of strangling our economy? And should we be thinking about selling off our investments and going to all cash?
May not address your original point, but your particular field (121 pilot) is always going to be a fickle b%tch of a job. If it's not oil prices, it's management, age 65, capacity constriction, terrorism related panic that dries up demand, fear of cabotage, people doing the job for free cuz it's 'neat-o' et al.
Frankly, you knew the score man, people need to go into an airline job knowing you will go through periods of unemployment, and depending on your timing, those can make for a very different career in aggregate than the guy ahead and the guy below your seniority. Fuel prices are unfortunately not the only nor the primary factor affecting your particular income stability year to year.
You're in a fickle job, gas or no gas. I wish ya luck. That's why I stayed in the military side of things, never touching an airline job so help me God. To each their own of course. And I do wish you and your family to be spared the hardship of an airline furlough. Again, good luck to ya.
As to has prices affecting the economy. Yeah 4 dollar gas is gonna squeeze the "middle class" to curtail their spending habits, and that has an aggregate effect on the supporting businesses. Yeah, above 150K/yr households with no debt can sustain the hit, but that's mere war of attrition, everybody else below is severely curtailing their driving patterns to the point that it starts affecting housing prices due to desire to relocate closer to work. This of course hasn't happened quite yet because prices haven't been this high on a steady basis. Give it a year, it'll show. 6/gas in another year? It's game over, mass discontent and loss of revenue due to people staying home and hunkering down. Gov will put their hands in it and manipulate/go to war with somebody to bring those suckers down. Not the end of the world but it's not going to be comfy , the 2010s as a decade. I already chalked this decade up on the loss column. It's tread water decade. Could be worse.
It is not just the $4 gas, it is everything combined that the average member of the middle-middle and lower-middle class can no longer afford. Shoes for the kids, food to fill the fridge, college for the kids, basics that just a few years ago most in the middle class could afford. As gas prices climb so does home fuel, so does food, so do all the goods we buy no matter how basic. There will be a breaking point no doubt, one which the upper income folks will not feel (they'll complain but will pay up). The lower-income group will fall off the charts completely and will not be counted in statistics anymore.
As to has prices affecting the economy. Yeah 4 dollar gas is gonna squeeze the "middle class" to curtail their spending habits, and that has an aggregate effect on the supporting businesses. Yeah, above 150K/yr households with no debt can sustain the hit, but that's mere war of attrition, everybody else below is severely curtailing their driving patterns to the point that it starts affecting housing prices due to desire to relocate closer to work. This of course hasn't happened quite yet because prices haven't been this high on a steady basis. Give it a year, it'll show. 6/gas in another year? It's game over, mass discontent and loss of revenue due to people staying home and hunkering down. Gov will put their hands in it and manipulate/go to war with somebody to bring those suckers down. Not the end of the world but it's not going to be comfy , the 2010s as a decade. I already chalked this decade up on the loss column. It's tread water decade. Could be worse.
i think a lot of your points are right. but don't underestimate the impact of more expensive gas even on households above $150k. i mean, i know it depends what part of the country you're speaking about, but i live in NJ, where $150k houshold income means two college grads that got married, more often than not. it takes money out of everyone's pocket and into a good that sends those dollars overseas, instead of into our economy. that's not good no matter what your household income is. hopefully, everyone will recognize this and start thinking about alternate transportation options now.
quote Will $4/gal gas make people tighten up to the point of strangling our economy?
The answer is very simple you can't spend money you don't have and that will be the case for many in the future if prices keep going up.Any one out there have a magic wand ?
It has been already over $4 in Oregon for about a month (regular is $3.99) and nothing has changed.
Starbucks are still full, people still drive, restaurants have diners, malls still have shoppers.
It's right around $4 here in the Seattle area as well, has been for a while- and it's funny people don't even seem to be complaining about it this time around. Malls are still packed, restaurants are still packed, even more strange to me- I still see brand new big SUV's on the roads that people are still buying (as proven by the dealer tags in the windows). Apparently people around here have enough disposable income that they aren't too concerned about the rising prices yet.
Apparently people around here have enough disposable income that they aren't too concerned about the rising prices yet.
Gas prices have been bouncing this mark for nearly six years now. Many of us expected it to stay over the $4 mark in 2008. So we adjusted our spending back then. So those of who stayed the path through the price of gas dropping for the past few years actually are now in front of the curve. We'll probably see a change if we go over the $5 mark and actually stay there.
Quote:
Starbucks are still full, people still drive, restaurants have diners, malls still have shoppers.
There are fewer Starbucks, fewer restaurants and fewer stores in the malls. People still drive because its seen as a right and not a luxury.
As NeilVA points out, gas hit $4 per gallon some three years ago. Are our memories really that short that we are acting like this is some new calamity? Don't get me wrong; I do believe it's serious, expecially because it comes at a time of economic downturn. Americans are known for their short-term thinking. We need to realize that despite the ups and downs in gas prices, long-term it is going to be up. There is no doubt about that - the low-hanging fruit has been picked (i.e., the oil that was cheapest to get out the ground has already been gotten).
The thing about the demand for gasoline is its relative inelasticity. That is, it takes a fairly robust increase in price before people start to make the difficult adjustments to use less. After all, taking the bus, carpooling, or riding a bicycle to work are significant rearrangements of our lives. Even getting a fuel-efficient car is a major change for people used to the gas-guzzlers.
As a nation we have had blinders on about this, and so it will take real pain to force the needed changes. People will moan and groan as if the government owes them cheap gasoline. Those of us with foresight knew in 1973 (the time of the first real gas crisis with lines at the pumps and major run-ups in prices) that the *** was up. I'm surprised that it has taken this long to get to where we are.
As NeilVA points out, gas hit $4 per gallon some three years ago. Are our memories really that short that we are acting like this is some new calamity? Don't get me wrong; I do believe it's serious, expecially because it comes at a time of economic downturn. Americans are known for their short-term thinking. We need to realize that despite the ups and downs in gas prices, long-term it is going to be up. There is no doubt about that - the low-hanging fruit has been picked (i.e., the oil that was cheapest to get out the ground has already been gotten).
The thing about the demand for gasoline is its relative inelasticity. That is, it takes a fairly robust increase in price before people start to make the difficult adjustments to use less. After all, taking the bus, carpooling, or riding a bicycle to work are significant rearrangements of our lives. Even getting a fuel-efficient car is a major change for people used to the gas-guzzlers.
As a nation we have had blinders on about this, and so it will take real pain to force the needed changes. People will moan and groan as if the government owes them cheap gasoline. Those of us with foresight knew in 1973 (the time of the first real gas crisis with lines at the pumps and major run-ups in prices) that the *** was up. I'm surprised that it has taken this long to get to where we are.
we hit it, but not before memorial day weekend, when prices typically START to increase due to summer demand increases.
as for adjustments, i know SUVs are still selling, but from 2007-2010, a lot of people started to purchase smaller vehicles. not only that, manufacturers wised up and starting focusing more on fuel efficiency, and smaller vehicles. That brand new Ford Explorer people are buying? not really an SUV anymore, as it's on the redesigned chassis that makes it more of a crossover, and gets better gas mileage. That new Mustang GT? has more horsepower but better gas mileage due to Ford's use of the direct injection technology (used in a few models now). So, while we are still just putting small bandaids on the problem, people aren't feeling the effects of paying $3.68 per gallon (average price in U.S. as of this week) the same way they were felling the prices before, because many people, even in gas guzzling SUVs, are getting better mileage than they were 3-4 years ago.
pretty amazing though. gas is currently 86 cents more than it was a year ago. in the middle of an economic recovery, where people have already tightened their belts and have just recently started returning to retail stores...this extra $1/gallon out of our pockets is $1 not spent somewhere else. if average prices creep up to $4/gallon this summer, there will be trouble caused by that. hopefully not too much, and hopefully we wise up and stop replacing 10mpg SUVs with 12 mpg SUVs.
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We've been at this point before.
