Will $5 gas ruin our economic recovery?
That's provided that you actually think we're in an economic recovery. I think $5 gas, at its core, increases the cost of consumer goods and decreases the disposable income that households have available, which results in decreases consumer spending. As a result of all this you'll see that the manufacturing cost of goods goes up, which cuts into a company's earnings, which means the cost of goods for the consumer goes up. As a result, company's sell fewer products and have lower earnings....... In short, a dependency on foreign oil will eat this country alive. Thoughts?
It's hard to say actually. $5 gas might not have the feared impact. When gas went from $1.25 per gallon to about $3.75 per gallon last decade (which greatly contributed to the economic crash in 2008), that was an approximately 200% increase in gas prices. That was hard for the economy to accomodate, and we sufferred the consequences.
If gas now goes from $3.80 per gallon to $5.00 per gallon that is only a 30% to 35% increase. While it won't help the economy, we may be able to absorb that sort of increase without a new recession. There are some indications that high gas prices are spurring people to trade in older cars for new cars that are more fuel efficient, which is positive for the economy.
See my Hub $200 Oil: Should We Be Alarmed? http://rocknj.hubpages.com/hub/200-Oil- … Be-Alarmed for an explantion why hitting $5 gas or $200 oil might not have the bad impact that everyone fears.
I think $5 gas will bring economic activity to a halt because there are so many people without jobs or underemployed. Plus, the cost of everything will increase along with it. Gas prices are not the only issue, oil is used in so many different areas that we don't think of. Plastics, lubricants, makeup all have a variation of oil in them. The difference from 2008 is that so many more people are out of work or underemployed. People do not have excess disposable income to be able to overcome much of an increase.
It is a shame that we haven't developed our resources in this country. We have so much oil underground and offshore in this country for atleast 100 years.
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