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Wednesday, September 7, 2011

High Gas Prices Continue To Drag On The Economy

$10 of gas in my truck. Not going far on that.
Whether you own a car or not, high gas prices affect you. Currently, gasoline is selling for about $1.00 more per gallon than a year ago. We've had a spike in the past year that put that figure to $1.50 per gallon or higher - depending on what part of the country you are in. Gas prices seem stable, but no relief is in sight. High gas prices continue to drag on the economy

There are millions of Americans who are living on a very tight budget. A rise of a few dollars in the cost of goods and services can really upset those finely tuned numbers. Changes in gas prices are obvious. You can see that it takes more to fill up your tank. Over a week or a month, the impact to your budget could be $40 to $200, depending on how long your commute is. Add another family car or two at the pumps and a $1.00 a gallon increase could impact a family's monthly budget the amount of a car payment or house payment.

Then, there are the indirect costs that are passed on to consumers. Food prices rise because truckers have to spend more on fuel. Every synthetic product we have - and there are a lot of them - use oil in their production. Clothing, plastics, plumbing parts, personal care products and more will gradually rise as the cost of oil rises.

Yet, the Obama administration has not produced an energy policy to help us reduce our dependence on foreign oil and forge ahead with cleaner, sustainable energy sources. Wasn't that a big part of the campaign sales pitch?

In the meantime, Americans have to make choices - repair the washer or drive to work - get new clothes for the kids or drive to work - skip the driving vacation to Disney World and stay in town. High fuel costs have wiped out entire industries. Want to buy a boat or an RV? They're still out there, but demand for them has dropped precipitously.

The problem with the oil market is that there are too many moving parts and too many variables. The oil companies will say that when increases hit them, they merely pass on the cost to consumers. But they continue to rack up record profits.

OPEC plays a lot of games, too. Libya did not produce that much oil in relation to the big picture of oil producers. But when unrest broke out in Libya, oil prices rose. OPEC has a reserve supply that has a daily production which is about 20 times what Libya produces. Libya could have been blown away and OPEC could have covered their absence. I get the feeling that OPEC is playing games with us and the rest of the world.

Until we get leadership in the White House that makes creation of a comprehensive energy policy, we will be at the whims of the open global market. And high gas prices will continue to drag on the economy.

Related articles:
Why The Psychological Recession Never Ended, Part 1
Why The Obama Recession Will Continue, Part 2

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