Has anyone looked at the effect of the soaring gas prices on our Economy?

[DU me]

I mean seriously? How will this impact the Airlines and the Truckers? How far will this further weaken thier already barely surviving bottom line, which in turn will affect ours.

[phantom power]

1. Sure they've looked at it. It's just what you'd expect: very bad.

[Daphne08]

2. My husband and I have definitely seen the effect

in our budget, and he has a small, fuel-efficient car.

[madrchsod]

3. do you really want to know?

it will not be pretty

[klook]

4. Money Magazine

But with gasoline prices soaring and likely to remain above $3 a gallon and amid pre-winter fears of rising home heating costs, the timing of this regional catastrophe could have a massive ripple-effect.

If this new national energy shock -- crude oil prices had already doubled in 18 months prior to Katrina -- adds to growing fears of a housing bubble, rising short-term interest rates and swelling trade deficits, the nationwide horizon darkens significantly.

"The oil price impact will be the biggest for the national economy," economists at Goldman Sachs said in a research note.

Goldman estimates that average U.S. crude oil prices of $70 a barrel for September -- close to Friday's level of about $69 -- could force a rise of $50 billion to $60 billion in annual energy spending that would force cutbacks in other areas and knock half a percentage point off third-quarter GDP.

But they outlined a worst-case scenario of fuel rationing.

"Demand rationing, not seen in this country since 1979, would certainly lower consumer confidence and cause a much more widespread hit to the economy," they added, saying this could force the Fed to pause its campaign of raising interest rates.
-from "Katrina's aftermath worse than expected," Money magazine, 9/2/2005

More: http://money.cnn.com/2005/09/02/news/economy/katrina_economy.reut/

[MADem]

5. It's what screwed DELTA and NORTHWEST

They did not have enough spare cash to hedge their fuel costs, like Southwest and others did, and they got hit right between the eyes as prices soared ever gougingly upward...

If it gets worse, watch the price of FOOD go up. Next time you are in the supermarket, take note of what you buy and where it came from. The increased cost will be slapped on your bill.

Pretty soon it'll be like Victorian times, when kids were THRILLED to get an orange at Christmastime...ah, that familiar round lump in the toe of one's stocking!!!!!

[ayeshahaqqiqa]

6. expect inflation

In fact, it's already happening. Fuel surcharges are being added to shipping costs. We had an increase on our uniforms just this week because of higher fuel prices for the trucks that pick up and deliver them to us. We are now charging new customers more for a quarterly pest service because of fuel prices. So far, we've kept the prices for our old customers the same, but if gasoline keeps rising, we'll have to have major rate changes on all our customers, especially those living more than 5 miles from our office.

[raccoon]

7. And expect official inflation figures to way understate the case. nt

[ProfessorGAC]

8. Yes, I Have

There is a serious flaw in the normal economic indicators in that the cost of energy is absorbed in the prices of all goods and services, and the impact of direct energy expenditures by consumers.

Since the cost of gasoline is not included in the inflation index as used by Treasury (they claim it's too volatile, but exponential moving averages can be used to determine a valid mask range), the inflation rate is understated grossly by the impact of the price increases at the pump.

As a result, the nonsense about GDP growth being ok because inflation is low is simply statistically incorrect. In addition, the price of the energy expenditures is included in GDP. Given that this industrial sector represents over 5% of GDP, a 30% increase in gasoline prices represents a GDP growth of >1.5%, without any change in productivity or consumption! When nominal growth is touted as 5.5%, then gas prices account for 28% of the nominal growth.

So, the economy cannot be sustained when 28% growth is due to the upward change in the price of one commodity, especially since this is digging into the consumption rate of the middle class.

There is going to be a slowdown at retail, just like there was in 1974 and 1975.
The Professor

[newportdadde]

9. Inflation is here in a major way its just understated on CPI.

Just look at your check and what you have left over from groceries its already running wild. Its one of the reasons the Fed still had to raise rates the other day and will continue to do so for some time.

The CPI will of course we understated though.

[zoeb]

10. I parked within 60ft of Wal-mart entrance at 6pm

and it wasn't handicap parking! That's my economic indicator!