Filed under: Oil, Headline news
The New York Times reports that people are changing their habits thanks to $4 a gallon gasoline. Surprisingly, gasoline is not consuming as much of the family budget now as it did in 1979, but those high gas prices are hurting. Some people, me included, are skipping their traditional Memorial Day vacation — opting instead for what AP dubs a Staycation.
People are certainly driving less. The Times reports that Americans drove 11 billion fewer miles than in March 2007, a decline of 4.3%. It is the first time since 1979 that traffic has dropped from one March to the next, and the month-on-month percentage decline is the largest since record keeping began in 1942.
And even though families are not paying as much of their income now as they did in 1979, we’re funding our enemies — Saudi Arabia, which supplied 15 of the 19 9/11 hijackers, is the U.S.’s second largest oil provider — 80% more than we were five years ago. Americans spend 3.7% of their disposable income on transportation fuels — that hit a low of 1.9% in 1998 and a high of 4.5% in 1981.
But we’re spending more in absolute dollar terms. In the first four months of the year, Americans spent $158 billion on gasoline. In 2003, just as oil prices started to take off — when the U.S. invaded Iraq — we spent $88 billion over the same four-month period.
With 70% of GDP growth due to consumer spending, the Staycation suggests that more airlines will be slicing their flights and raising their prices — all of which will extend the recession.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.
Entries (RSS)