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Brace Yourselves

March 4, 2005

If you read or watch the news at all, you’ve doubtless heard of the impending hike in gas prices.  In case you haven’t, USA TODAY has the story.  An excerpt:

Gasoline prices could rocket 24 cents a gallon the next few days, as stations across the USA scramble to keep up with big jumps in the prices of oil and wholesale gas, a veteran energy-price analyst forecast Thursday.

"It’s going to be brutal, horrendous," says Peter Beutel, president of energy-price tracker Cameron Hanover. He has followed energy markets for nearly three decades.

Now, if you’ve ever talked with me about economics for any length of time, you’ll know that I firmly believe rising oil prices had a heck of a lot to do with the recent recession.  How?  Simple, really.

In late 1999, I was living in Nashville.  A gallon of regular gasoline was going for about $0.94.  By March or April of 2000, that price had jumped up to $1.34.  In other parts of the nation, where gasoline prices average higher, the jump was even worse.

The hike in gasoline prices started a chain reaction.  It hurt consumers by limiting their disposable income.  That shrinkage of disposable income hurt consumer-oriented businesses.  Goods and services suffered.  Profits shrank.  On the back end, transportation costs rose as well.  Adventurous new startups suffered the worst, as their goods and services were pioneering and, well, unnecessary.

By the time summer hit, it was obvious that the economy was headed downhill.  NASDAQ hit its peak around 5,000 in March and never came back.  All the while Bush and Gore sparred about what to do with the massive tax surplus that would not last beyond 1999.  Then came Enron, Worldcom, and 9/11.

A lot of things served to beat our economy back down as it struggled to get back on its feet, but I am convinced it was gas prices that knocked it to its knees in the first place.  Our consumption levels in the late 90s were staggering (they still are), and the gas prices were like that one Jenga block holding everything up.

Nowadays, of course, we’re used to gasoline being almost twice as expensive as it was six years ago.  And here comes another hike.

I, for one, agree with our trusty road sign.



As an aside, my trusty Xterra has been averaging a whopping thirteen miles to the gallon recently.  Sigh.

One Comment leave one →
  1. March 4, 2005 12:48 pm

    Makes me happy I switched to a Jeep recently, with a whopping 15 miles to the gallon.


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