Why Haven't High Gas Prices Affected The Economy Yet?

[DemocratSinceBirth]

And how high can they go before they cause a recession, inflation, or both....

Recession+Inflation=Stagnation....

[redwitch]

1. They have affected the economy

just not of the people anyone seems to care about.

[ComerPerro]

2. I agree

Its sure as hell affecting me.

$35-$40 to fill my car. And I have to drive 35 miles each way to work. I get about 30mpg, but its still a lot of gas.

[Waya]

4. They have affected the Economy.....

....the price of everything goes up because of higher gas prices. Companies aren't willing to take less profits - they pass the higher expenses right on down to the consumer. It's coming to the point where there needs to be a loan counter in the back of your local grocery store so you can take out a mortgage to buy necessities - like food.

[jsamuel]

47. Yep, taking most of the money I am able to spend on non-necessities

I haven't been to a movie or been able to rent a movie in 4 to 5 months.

Gas is costing me and my wife together an extra 80 dollars a month than it used to. Now we can't go out once a week like we used to. The 20 dollars we used to spend once a week on a movie is now going to gas.

[Vinca]

62. My thoughts exactly.

If you're already wealthy and have lots of oil company stock, you're now even wealthier and your economy is getting better by the day.

[1932]

3. Perhaps because oil demand is inelastic

and because the money spent on oil is helping a part of the economy that is rich get richer, which helps the bottom economic line while it disguises a distribution of wealth problem -- ie, the fact that wealth is rapidly flowing from the middle class to huge multi-national corps.

The real economic problem with gas prices is that distribution of wealth problem and middle class poverty/debt is still being masked by the fact that middle class people are living off mortgage debt and credit cards.

We won't feel the damage of high oil prices until the balance tips against the middle class due to a perfect storm of problems: real estate crash, high consumer prices, and low wages/unemployment.

[rfranklin]

6. Yes, it will take long term catastrophic events to affect the American...

psyche. There is so much invested in the status quo and the realization that it cannot endure is too scary for most people to contemplate. What, I can't drive my giant SUV at 85 mph down the highway? (I NEED it! I have three kids! I have a dog! Sometimes the whole family has to go someplace!) How can I survive??!!

[Conservativesux]

57. Forget the gasoline. When Milk is 10 dollars a gallon, they will wake up!

Its all about obtaining food, water and shelter. The rest is nice window dressing.

[Conservativesux]

58. self delete

[jody]

7. "until the balance tips against the middle class". Yes and we need wars,

abortion, prayer in schools, same-sex marriage, and other divisive issues to keep the middle class from discovering the economy is our #1 problem. Clinton is still right, "it's the economy stupid"!

[DemocratSinceBirth]

13. It's Not Totally Inelastic

Folks can conserve energy by driving less, turning up the air condition, driving more fuel efficient cars etcetera but there are limits to how much you can conserve...

[GasolineBoycott]

31. organized boycott

What is being proposed is, starting the week of September 11th, that like-minded Americans don't buy gasoline on Fridays, Saturdays and Sundays, of each week following September 11th, 2005. Together, we can force the price down by overloading distributors on weekends. We know that the American infrastructure is set up so that people have to drive to work. We also know that America is full of loose pedophiles and we have to drive our children home. With this weekend boycott of gasoline, all like-minded Americans could participate in this boycott. We are the consumer, we have the choice and your suggestion to also conserve gasoline, along with this boycott plan is great. Lets stop buying the product that gets our kids killed overseas.

[newyawker99]

39. Hi GasolineBoycott!!

Welcome to DU!! :toast:

[GasolineBoycott]

42. Hello from the newbie

Thanks for the warm welcome New Yawker!

[EST]

5. It's happening!

Just one example- We have, in anticipation of the coming crunch, been allotting one hundred dollars a week (out of the savings acc't) to purchasing enough food, in durable containers, not needing refrigeration, to last for a year. If we are careful and ration pretty tightly, the trucks can quit running now and we'll get by.
The prices of the same brand of chili beans, canned, at the same store, have gone up 11% in the last year alone. I have compared several other products and they have increased between 3% and 14%. Nothing has gotten cheaper--nothing.

[MadHound]

8. They are affecting the economy

Food is up, anything that is shipped cross country gets hit with a fuel surcharge, airlines have raised their ticket prices, all of this and more is trickling through our economy, raising prices, slowing growth. Nobody in the MSM though seems to want to talk about, nor anybody in the administration. Yet ordinary Americans are noticing the price rise, and they're starting to get pissed.

[annabanana]

9. They HAVE... it's the yardsticks that have been changed.

When they talk about the unit prices.. they are no longer talking about, for instance "per pound". (Have you tried to buy a pound of coffee lately? How many ounces are in those cans, anyway.. it keeps shrinking?)

They changed the basis for the cost-of-living numbers by dropping commodities that people NEED, and substituted other commodities whose prices have come down. That means that when people who get "cost of living" adjustments to their income are falling farther and farther behind every year.

THEY CHANGED THE MEASURING MACHINES

[onecent]

32. My husband and I cleaned out a pantry and found an old box of

kleenex, and compared it to the one we had just bought. I was floored. Width and length...crazy. Sames with cans of Macadamia nuts.

[Greyhound]

51. Wow someone does remember!

I'm almost in tears. Thank you.

[Mr.Green93]

10. It takes a while.

Ideally we need it to really crash in the spring/summer of 06. Just in time for the elections.

[Swamp Rat]

11. The bubble is about to burst.

[Deja Q]

27. I'd say we have until oil reaches $150/barrel before it's over.

But more people will be hurt big-time by the time it reaches $100/bl.

[izzie]

12. It has but guess who controls the reports out of the govt?

Also I think long ago they took gas off the COLA figures. Like few of us have any thing to do with gas.

[DemocratSinceBirth]

14. There are two inflation numbers...

one that includes energy costs and one that excludes energy costs....

[hatrack]

44. And there are three unemployment numbers

One counts anyone who works one hour in the preceding month as "employed". Guess which unemployment number they report?

[wishlist]

15. Extremely low interest rates/easy credit are propping it up/cushioning

Most Americans are using their credit cards for all of their purchases including gasoline. The low interest rates have made it easier to buy cars and homes and big ticket items. There has been a huge increase in consumer debt and American home 'owners' have much less equity in their homes than they did 5 years ago. Most lines of credit and many mortgages will go up drastically when interest rates rise.

Despite some news reports touting the lack of inflation, there is significantly higher inflation this year which will continue along with higher interest rates as well. Does not bode well for consumers or for the stock market which is at a standstill and no higher than it was over 4 years ago when Bush took office.

We are floating on a cushion of debt, but eventually as interest rates and oil prices keep steadily rising the tide will turn. Question is how long things will stay afloat.

CNBC business channel reported yesterday a weather prediction this winter for the Northeast U.S. that is calling for extremely cold winter with temps averaging about 3 degrees below normal. They said the same forecast group correctly predicted this summer's weather.
It is going to a rough winter.

[DemocratSinceBirth]

16. THE GDP Seems To Be Growing At A Healthy Clip....

I am just amazed that higher gas prices haven't had a larger impact on the macroeconomy like in the seventies...

[Hubert Flottz]

18. "It is going to a rough winter."

That's where all that great Republican Morality and family values comes into play! Grandma and the babies will all freeze and there will be more loot for the fat cats and preachers!

[jpak]

48. and...as a result of the Bankruptcy Bill

credit card minimum payments will double this fall.

Economic Shock and Awe will visit every American household this winter...

[knoxvilleboy]

66. And follow that with the raise in credit card minimums

In October, gas prices will be $3-4 a gallon. People's credit card minimums will double. The 30% or so of people who pay only the minimum will sink between the higher credit card rate and the high fuel prices, significantly higher food and heating prices. By February, the US will be sinking. A poor 4th quarter will start to sink retail chains catering to the middle/lower middle classes. Northwestern, Delta and United Airlines will go into bankruptcy.

[kentuck]

17. Who says it hasn't ??

There was a plus 6000 jobs created last month... I think I read?

[DemocratSinceBirth]

19. Even Though The Jobless Report Is Suspect

Even though unemployment figures are suspect due to the undercounting of those who quit looking for a job and are no longer counted unemployment is still low by historical levels...

I am just surprised that there hasn't been more economic disruption...


I consider myself fortunate because I don't drive much and I can afford the price of gas but when I see working class folks filling up I wonder about the hardship theses prices are causing..

[Hubert Flottz]

22. "I wonder about the hardship theses prices are causing"..

Cheney needs the extra money to feed his ego, more that the middle class needs it to feed the kids. The only kids the GOP gives a damn about are the ones who haven't been born yet, that's the beauty of having all that great GOP "MORALITY" and "family values" horseshit!

BTW...I'm glad for you.

[Hubert Flottz]

20. Burger King had a big sale last month, I think!

That figure did include China...right? The Economy is "GREAT" because the GOP learned well in the Fuzzy math classes and book cooking classes that Enron sent them to.

[teryang]

21. This economy sucks

Among the people I have contact, only the most die hard ideologues on the right and the rich don't recognize it.

[Hubert Flottz]

23. pResident Bush is doing his best!

To ruin the country.

[shadowknows69]

24. are you kidding me?

buy a gallon of milk or gallon of anything lately?

[DemocratSinceBirth]

25. I Am Not Defending The Economy

I can only go by objective criteria such as GDP, Balance Of Trade, Inflation, Unemployment,the Stock Market ectctera...

One would expect to see all these measures going south and they aren't...

I am curious as to why they are not ...

[annabanana]

28. (have you checked your ruler). . . . .n/t

[DemocratSinceBirth]

30. I Need Objective Criteria To Go By...

When I see joblessness rising and the GDP falling than I will know that high gas prices have adversely affected the economy...


My microeconomic condition or my neighbors is important but it doesn't answer my question...

[GasolineBoycott]

36. your high standard of debate

Certainly, there has to be objective criteria, a pain index. But you cannot deny that the oil situation dictates the marketplace. When a pipeline is bombed or their is a refinery fire, we see the result in the stock markets the very next day. I think there is a salient point in gasoline pricing, a watermark we haven't reached yet. Compared to Europe and Canada, our gasoline prices are still cheap. When that salient point is reached, you will the economic results of basing our markets on oil.

[DemocratSinceBirth]

41. I Agree With You 100%

Where is the inflection point?


The difference between Europe and America as you are aware is the dependence on the automobile... People here need to drive more because of geography and lack of adequate mass transit... Texas has a larger land mass than most European nations...

[idlisambar]

49. the story with GDP

First of all the Balance of Trade is "going south", the US current account deficit currently amounts to over 6% of GDP.

Concerning the GDP itself (from an earlier post)...

Since the 80's and especially since the mid-90's there has been a concerted effort within the various government agencies to eliminate the "overestimation" of inflation. The moves were legitimized by the findings of the Boskin commission in 1996 which found the previous methods used to calculate inflation had overestimated it by 1.1%. Ever since they have been eliminating this "bias" in steps, and also finding new biases to justify further changes. The Boskin commission findings were with respect to the CPI which was once used as the inflation metric to calculate GDP, but now there is another measure called the "GDP deflator" that is used. Most of the relevent changes to the CPI were also carried over to the GDP deflator and in fact in recent years (since 2002) the GDP deflator has been even lower than the CPI.

The upshot is that GDP growth reported in recent years at a little over 3.0% would be about 2.0% by the inflation measure used in the 80's (perhaps even lower). This is one big reason why there is a disconnect between the GDP/productivity numbers and the economic reality on the ground.

On the Boskin Commission:
http://pages.stern.nyu.edu/~nroubini/NYT/NYTCPI.HTM
http://www.epinet.org/content.cfm/books_bkcpi

According to official sources...

...Clearly, the combined effect of the BLS's changes on the CPI over the 1995-2000 period will be substantial. Taken together, the changes may reduce measured inflation on the order of 0.7 percentage points compared with what would have occurred if no changes in methodology had been made. Therefore, CBO's forecast for CPI inflation in 2000, which is 3 percent, cannot be directly compared with CPI inflation measured using pre-1995 procedures.

http://www.cbo.gov/showdoc.cfm?index=31&sequence=5

Some commentary arguing against the worthiness of the changes...
http://moneycentral.msn.com/content/P72746.asp
http://larouchein2004.net/pdfs/economics/030214ref.pdf
(yes, it's a larouche analyst but the facts presented, particularly the discussion of quality adjustment and autos are very interesting)

Agree or disagree with the changes, they should be remembered when making international comparisons...

The economic benefits of the IT revolution are now visible in Europe and Japan

AFTER years of debate about the virtues or vices of the so-called “new economy”, most economists now agree that America has, indeed, enjoyed stronger productivity growth since 1995, thanks largely to investment in information technology (IT). However, many also agree that Japan and Europe, for some reason, seem to have missed out on computer-driven productivity gains. The growth of labour productivity in Japan and most European countries has actually slowed since the mid-1990s. New research, however, suggests that the economic rewards from IT have spread outside America, but have not been measured correctly.

http://www.economist.com/finance/PrinterFriendly.cfm?Story_ID=2155438


Some commentators think that the changes to the inflation metric since the 80's are even greater than official sources acknowledge...

walter j. williams' informative site...
http://www.gillespieresearch.com/cgi-bin/bgn

and an audio interview with him...
http://www.financialsense.com/Experts/2005/Williams.html

[GasolineBoycott]

26. High gasoline prices

The visible damage of high gas prices won't be seen for a couple more years, then the chickenhawks can blame the Democrats. The reason why is because the middle class has not yet exhausted its resources on gasoline yet.

[salin]

29. If one can keep changing the formula used to measure inflation

...

a year or so back they changed a major index in terms of how it was weighted. Energy costs, education costs were scaled back while entertainment costs were given a bigger weight. Haven't kept track recently - but wouldn't be surprised to learn of more tinkering so that it looks like there is little problem (at least on paper.)

Trips to the store, however; and regular utilities - paint a slightly different picture.

[DemocratSinceBirth]

33. I Realize Inflation Figures Can Be Manipulated

I read a funny account of how during the Nixon administration they were trying to add all kinds of exclusions to the inflatiuon index until Herb Stein opined there would be nothing left to measure....

[salin]

35. hadn't heard that one...

what surprises me is the stock market. We know that reporting is as bad as ever (Voelker walked out of the job of working with reps from the big accounting firms who were tasked to write up new practices and procedures - in order to prevent the obfuscation that allowed the major corp. implosions of '02; When Voelker left the task he declared that there was NO interest in any change - and no sense that they (accounting firms) had to change at all.) - we know that Cox has been appointed to "ease" the "pressure" from Sarbanes/Oxley. So just as it was three years ago - there is no good information about corp performance (eg earnings vs debt, etc.) - leaving investing in the market a total crap shoot. Then add the oil effect - and still little affect on the market. REally odd, imo. Certainly not rational.

[all.of.me]

34. i believe it has

for me personally, i have started to drive less, cut out the trip to the gas station for an ice cream at night, do errands when picking up the kids, and so on. i am also stocking up on sale items for winter, buying more used clothes, and investing more in my business. i am in recycle mode! i live a very simple life, and there is only so much i can cut back on, so the gas prices make me very nervous.

for my friends, it is the same thing - less trips out of town, no extra driving, foregoing things to put gas in the tank to get to work. suddenly vitamins are a luxury, not a necessity.

when gas gets too expensive for people to get to work, life will REALLY get interesting.

[DemocratSinceBirth]

37. That's What I'm Getting At.....

"when gas gets too expensive for people to get to work, life will REALLY get interesting."


Not that people won't be able to afford to drive to work but that businesses will start laying off people because of rising energy costs...

[all.of.me]

46. i think the two will go hand in hand

if people have to cut back in order to get to work, they'll have a limit on where to stop. there'll be a breaking point, i guess you could say, where it just isn't going to be feasible anymore.

[GasolineBoycott]

40. minimalism

One irony in taking on a minimalist lifestyle to conserve energy is that people who are not compelled to do likewise will simply take advantage of you and use even more energy, the energy you are conserving. But i applaud your efforts.

[all.of.me]

45. it's the same with water where i live (high desert)

if you conserve it, someone will pick up your slack.

but part of tightening my own belt is that my work is seasonal, and my income is erratic. what i save now will help out in lean times, and lean times get closer with every gas price increase.

[dogday]

38. good time to raise them when the President

is hiding out and does not have to face anyone about anything.

[hatrack]

43. Well, you see, when you take out fuel and food from the Price Index . . .

There's NO INFLATION AT ALL! WOWEE!!! And besides, who uses fuel and food. I know that I sure don't! :eyes:

[Oerdin]

50. We really are more energy efficent.

According to NPR we are four times more energy efficent then we were in the early 1970's when we were hit with the Arab oil embargo. Much of that has to do with the growth of the services sector and the decline of the manufacturing sector but the fact remains we use a whole lot less energy per dollar of GDP.

Higher prices still pinch us but not nearly as badly as 20-30 years ago. That dosn't mean we couldn't do a whole lot better and a push away from oil and natural gas towards nuclear power would mean big decreases in energy imports and green house gas output. We could give it a real one two punch if we enacted higher CAFE standards for light vehicles and forced automakers to include SUVs and light trucks into their CAFE equations.

[Conservativesux]

56. The value of wages for workers have fallen steadily since 1972......

So we need to account for that effect as well, dont we?

[Liberal In Texas]

52. What do you mean YET? It has. Check out the price of milk and bread

at the local Safeway.

They've gone up. All goods get here because of fuel. When that goes up, so does the price.

Ecnomics 101.

[mbee]

53. I'm hearing a lot of complaints not just about gas prices, but the

economy in general. This is coming from lots of pugs who have lost their jobs, but some of them are brining up drilling in the Wildlife Refuge, of course!

[KitSileya]

54. It seems that the high gas prices

have affected the economy, but not enough for it to be impossible to hide by the maladministration. And the perfect economic storm hasn't struck yet, as people are still staving off complete collapse with credit cards and savings and frugality.

However, what I would like to know, is will the collape come within the next 3 years, or will Americans just manage to eke out their meagre living until a Democrat has been elected, who will then get the blame?

[Conservativesux]

55. Of course, this is all Clinton's fault because Monica gave him a hummer...

No, not that kind of Hummer :)

[DemocratSinceBirth]

59. Ameica Is Sometimes Like A Bull In A Chinashop

Because of its immemse power when America acts recklessly it's the china that gets destroyed...

What other nation could waste hundreds of billions of dollars on an ill thought out occupation of a country five thousand mile away...

What other nation in a time of rising energy prices could make vehichles that get less than ten miles per gallon it's staple...

Because of it's power America has a much larger margin of error than other nation but it is not infinite....

As with other empires there is a breaking point.

[KitSileya]

60. Eactly. But the question is, how close are we to the breaking point?

I guess that is what the OP is asking - how come everyone's been crying about the dangers and hwo badly things are going, but there's no sign of it in the official numbers. Of course, ordinary people are feeling the effects, but they are as of yet still managing to keep things afloat. But how close are we to the day everything sinks? Are the official numbers correct, or are we even closer because those numbers are being manipulated? When will the bull notice there's nothing left to break?

[DemocratSinceBirth]

63. I'm The OP

There has to be an inflection point as there was in the 70's when rapidly rising oil prices set up off a nasty downward economic spiral...

America is more fuel efficient but that suggests to me the inflection point is a bit further away but not eliminated...

[KitSileya]

64. Exactly. And it does seem as if the * maladministration

is doing everything it can to bring about the perfect storm as soon as possible without alerting anyone to what's coming. But it is coming, there's no doubt about that, not as long as the maladministration is set on its present course. It's just very difficult to say when.

Many are betting on this winter, because of the bankruptcy laws. However, I think that until we're actually dropping like stones after having walked off the precipice, the government is going to do its level best to convince us there's miles and miles of road ahead of us. Which is partly why they're prettying up the numbers and presenting everything in its most positive light. Now, I'm not an economist, far from it, but it would seem as if their strategies are working in the short run, because it keeps up the confidence in the economy, and if that confidence is shattered, we'll fall ever more quickly, but the further we go, the harder it'll be to crawl back up. I don't know if I'm making any sense here, so I apologize if I'm being muddled.

[DemocratSinceBirth]

65. You Make Perfect Sense...

I'm not an economist but I do agree that psychology plays a large role in the economy...


That's your point and it is a fine one....

[KitSileya]

68. Thanks.

It will be interesting to see everything implode. I guess I have a sense of detachment because a) I don't live in the US, b) I live in one of the richest countries in the world who happens to be an oil exporter, and c) I don't have any dependents and don't live in the same town as my family to begin with. I just got a full-time job on Thursday after 2 1/2 years subbing, so I know I can manage on far less than what I'll be making now. In other words, I'm used to living frugally, and while food prices may rise, I've been contemplating growing my own food for years, so I don't think I'll be as blindsided as man (most!) Americans will be. Not to mention that in the darker recesses of my mind, the devil is shouting "they deserve it!" - after being so very, very frustrated with American politics since Nov 2000.

[WePurrsevere]

61. Gov? Manipulation - Personal? - It already has & getting worse...

The government has long manipulated the figures and statistics so that the people only know what the gov wants them to know however BushCo seems to have become the ultimate in the "fuzzy math" Bush derided Gore with.

For most Americans however the reality is that their personal economy has most certainly been affected. When you go to the gas pump and are paying increasingly high prices every day, when you go to the store to buy groceries and your bill is increasing even while you're cutting back further and further and when you're income isn't going up anywhere near as fast as your output, then your personal economy is in increasingly rough waters and you feel like you're going down for the 3rd time with no help in sight.

From what I've seen the government can tout that the economy is getting better, that unemployment is going down and manipulate the interest rates and statistics all they want to, eventually however the average American (at least the ones with more then 2 gray matter cells left) catches on that it's all a huge stinky pile of political BS when they don't see their bottom line getting any better or any more secure and actually seeing it go down a bit every week. Basically... to us it's "Money talks... Bull___ walks" and "show me da money".

[BluePatriot]

67. Oh, they have...

government's just cooking the books. And I guarantee you Dick and Jane American are starting to notice the disconnect between what's coming out of the "economy reports on the news" and how much spending power they REALLY have in their daily lives.