How Gas Prices Impact Economics
Joseph Buschman
Mr. Reuter
Economics
3 March 2014
How gas prices Impact economics
Every week all over America gas prices fluctuate affecting everyone and their families. Many Americans have to budget their week and their daily driving around the cost of gas prices. The opportunity cost of taking the bus over a car is there for many, however it is often passed up. Prices affect everyone, from retailers to the auto industry as well as public transportation. We has Americans never know when or where the price will raise all we know is that it can happen at any time.
To begin with volatile gas prices have taken over media and television, from applications on our telephones updating us on where the cheapest gas prices are, to daily news updates showing us the same cheap prices. America is pinching pennies to travel to work and back. The first side effect of raising gas prices is the decrease in spending. Shoppers conduct much less spending and according to MasterCard Advisors “online shopping in the United States during April, 2011 grew by its fastest rate in almost four years” (How Gas Prices Affect the Economy).This nice alternative is convenient for the consumer however does effect the businesses economically not having the costumer physically there. Even with purchasing the item online consumers still have to pay for shipping which could then in turn be cheaper then commuting to the store themselves.
In addition to retailers coping with raising gas prices the auto industry fully embraced the change. They are designing promoting and selling more fuel efficient vehicles. I am one of the many Americans however that cannot afford a new fancy fuel efficient vehicle and takes a weekly visit to the pump to fill up a very old and quite thirsty 1994 Ford Explorer. I do look forward to the day that I can purchase a fuel efficient car. Consumers support the sales of hybrids in the United States and “sales of hybrids has increased 33.9% in the first quarter of 2011 in comparison to the same period in 2010” (How Gas Prices Affect The Economy). While this is good news for people selling hybrid cars and there is no scarcity of theses gas savers. Auto industry sales for new cars have declined and more people like myself can only afford to lease or own a used vehicle.
I have to cut back in many areas just like other people. For example it would be great if my boss would look at me and say he is going to pay me more because the price of gas went up. We all know that will never happen. The chart below shows how this affects the economy. If income doesn’t rise with the price of gas then the economy suffers. As well as the article How Gas Prices Affect the Economy states, “Some businesses, including colleges, have elected to go with a four-day weeks to limit their employees’ or students’ financial burden for commuting. In 2008 Southwestern Community College announced a four-day school week to help students and staff save on gas money” (How Gas Prices Affect The Economy). Though it would be nice to have a 4 day week it is very unlikely to happen in such a financially stable community like Pewaukee.
The last thing that needs to be discussed is public transportation and the increase in use since the price of gas has risen. Americans are saving money in large cities like New York by taking the bus or train, instead of driving. To get a better picture at the amount being saved, “February Transit Savings Report, individuals who ride public transportation instead of driving can save, on average, more than $826 this month, and $9,917 annually. These savings are based on the cost of commuting by public transportation compared to the cost of owning and driving a vehicle which includes the February 12, 2013 average national gas price ($3.60 per gallon- reported by AAA) and the national unreserved monthly parking rate” (As Gas Prices Rise). Public transportation is sure saving those who use it a lot of money. However gas is most definitely one of the inelasticproducts that we discussed, we can go without it however the majority of the nation chooses not to. Finally the trade off to take the bus or other mode of transit isn’t always around for people.
As high school student with low paying job and a beater car I feel the pain first hand. For those students that do not have to pay the expenses that come along with your car consider yourself lucky, in my opinion this takes a lot of responsibility away from teenagers. Whether you pay for it or not the pain at the pump is real and affects a large part of the economy.
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