Rising gas prices have heavy impact on poor.

Discussion in 'In the News' started by xcel, Apr 23, 2006.

  1. xcel

    xcel PZEV, there's nothing like it :) Staff Member

    Families living on fixed, modest incomes usually the first to cut back.

    Associated Press – April 21, 2006


    For most Americans, today’s rising gasoline prices are an annoyance, not a serious financial hardship.

    Then there are people like Kenneth and Edith Taylor of Baltimore, who already struggle to make their monthly social security checks of less than $1,700 last by cooking casseroles and soups at home instead of eating out and forgoing new clothes for as long as possible. Now, with neighborhood pump prices averaging $2.85 a gallon, the Taylors say they simply cannot afford the 80-mile roundtrip to visit their daughter more than once a month.

    “There and back is $10 worth of gasoline,” said 84-year-old Kenneth, who used to make the trip in his Buick LeSabre at least every other week.

    The Taylor family’s increasing frugality may be a drop in the bucket for the world’s most voracious energy consuming nation, but it is not inconsequential and could be the start of a broader trend.

    Recent government and industry data show that America’s consumption of gasoline is not rising as rapidly as it was this time last year, and analysts say families living on fixed or modest incomes usually are the first to cut back. If prices continue to rise, other demographic groups expected to trim their gasoline consumption are young adults, who tend to have less pocket change than their elders, and people living in rural parts of Texas and Wyoming, where long drives are a routine part of life.

    Jim Magagna, a sheep rancher and the executive vice president of the Wyoming Stock Growers Association, said it requires a lot of transportation fuel to manage crops and livestock, and that makes it difficult to significantly curtail consumption on a day-to-day basis. However, ranchers he knows are finding ways to scrimp, for example, using four-wheel all-terrain vehicles instead of pickup trucks to get around their properties.

    And because most ranchers live 30 miles or more from the closest grocery, drug store or bank, “they may make one trip to town per week instead of two,” said Magagna.

    If there is going to be any significant decline in energy prices this year, “it is going to start with softening demand,” said Peter Beutel, president of Cameron Hanover Inc., an energy market advisory firm based in New Canaan, Conn.

    A.G. Edwards & Sons commodities analyst Bill O’Grady explained that because of constraints in oil production and refining “very small increases in demand bring about outsized gains in prices. Likewise, a very small drop in demand would have a similar but opposite impact. That’s the part that’s going to surprise people.”

    So far, though, the evidence points to only a miniscule shift in behavior nationwide, and no deceleration in prices.

    Wachovia Corp. economist Jason Schenker said he expects the most price-sensitive Americans to continue cutting back on gasoline where they can, and that their spending on other goods is also likely taper off. However, this should only be felt at the margins of total economic growth, which will remain steady at about 3.5 percent in 2006, he said, because employment and wages are rising.

    “What happens in those lower quintiles is not indicative of what happens in aggregate,” Schenker said.

    But corporate America is responding.

    Wal-Mart Stores Inc., the nation’s largest retailer, warned earlier this week that it expected reduced sales throughout 2006 from its least wealthy customers, and the company highlighted its strategy to market more higher-end goods to maintain growth. And after reporting a $92 million first-quarter loss, AMR Corp.’s American Airlines, the country’s largest carrier, said it would mothball 27 of its most inefficient aircraft.

    The Energy Department released data this week showing that average daily gasoline demand since the beginning of the year rose 0.9 percent. That compares with an increase of 1.4 percent during the same period last year.

    Meantime, retail gasoline prices, which average $2.86 nationwide, have risen by about 60 cents a gallon since the start of the year due to a combination of rising oil prices, dwindling supplies and jitters about possible supply disruptions when the Gulf of Mexico hurricane season begins in June.

    There is additional concern this year about the availability of ethanol, a corn-derived fuel that is helping to replace a gasoline additive known as MTBE, which enables fuel to burn more cleanly but is being phased out next month because it has been found to contaminate drinking water. Some fuel distributors say they are already experiencing logistical challenges as terminal owners drain their tanks of MTBE-laced gasoline in preparation for the switch to ethanol blends.

    Stuart Lowry, director of marketing at Tiger Fuel Co. in Charlottesville, Va., said retailers may have to wait longer than usual for deliveries until the transition is complete, meaning tanks could briefly go empty — a supply hiccup he refers to as “ethanol hell.”

    Of course, for many families it is their wallets, not their fuel tanks, that are in real danger of running on empty.

    The effect of rising gasoline prices shouldn’t be viewed in isolation, said Carol Clements, chair of the National Fuels Fund Network, which provides emergency financial assistance to poor families that cannot pay their electricity or home-heating bills. “All of these energy costs are having a compounding effect,” she said. “We’re seeing more people bumped from middle and working class to low-income and poverty situations.”

    At a Wal-Mart in Marietta, Ga., Ray Ernst waited for his wife in the parking lot Friday as she went in to buy a toy for their 6-year-old granddaughter, but he was quick to say the couple wasn’t there to browse. The 69-year-old worker for a medical claim processing company said $3-a-gallon gas has forced him to cut back on nonessential items.

    “We watch groceries a little closer too,” said Ernst. “We aren’t buying appliances. I get what I need and try to cut down on what I don’t.”

    Similarly, Caroline Kirk of Highland Park, Texas, has found items that were once on her necessities list have now moved into the luxuries category.

    “Blueberries, I love them, but they are $3.99 a pint,” Kirk said. “I don’t have to buy those right now, but I have to buy gas.”

    In contrast, the Taylor’s of Baltimore, and other families barely making it from check to check, are making sacrifices that the vast majority of Americans wouldn’t dream of.

    Late last year, with electricity and home-heating bills soaring, Kenneth Taylor tried to pinch pennies by not taking his high-blood-pressure medications as frequently as prescribed. He soon collapsed and landed himself in the hospital. His wife Edith now makes sure Kenneth doesn’t repeat that mistake, but other spending cuts will certainly be made and the couple has not ruled out selling their car.

    “You have to give things up,” she said.
  2. philmcneal

    philmcneal Has it been 10 years? Wow

    its funny they never once questioned, "what can I do." But its sad for those without the internet or not familiar with it... they will never see what we have to say about saving gas.
  3. Chuck

    Chuck just the messenger

    Highland Park is the Beverly Hills of Dallas! It is a bedroom community of about 30,000 inside Dallas just north of the downtown skyline and a mile south of Southern Methodist University ("Harvard"). Known as "The Bubble". It's not uncommon for someone to pay $250,000 then level what's there to build a McMansion.
  4. dqdave

    dqdave Member

    Yep Delta flyer, We are stretching the "middle class" right out the door. Seems to me we have more "rich" and more people "struggling to pay". This will be very apparent with the approaching credit crisis.
    Great article wayne! But, most poor people will not be able to afford changing the car they own to buy a fuel efficient car (not that many around that are cheap). So, they get by with less trips.
  5. Chuck

    Chuck just the messenger

    I do know someone that bought a motorcycle after the Katrina gas spike. In fact, someone in my neighboorhood was tailing me for a mile and I was looking to make sure he did not have a white helmet, leather jacket and badge. ;)
  6. Chuck

    Chuck just the messenger

    If I Had to Adjust....

    It's a 25-mile work commute for me. If I drove the average 20mpg American vehicle and had to do something quick to cut the gas pump prices, I'd have to get a small motorcycle. That's scary since Dallas traffic is heavy and crazy things can happen....

    The only other thing I could do is try to work a four-day week - maybe.
  7. psyshack

    psyshack He who posts articles

    Wife and I live in a little poverty ridden town south of Tulsa. Our jobs being in Tulsa means we drive in everyday. The high gas prices have parked the Ranger and forced the wife and I to ride in together to Tulsa for work. We can do this no matter how high gas gets. And keep it up. Theres no way I will live in Tulsa. I guess worse case would be to quit our jobs. I dont have a problem with that. :) Wife dosent like quiting jobs... LMAO.

    This does hurt our children that are just starting out in life. Its a hardship on there low starting income levels. The fact is low gas prices are history and there going to have to adjust.

    Im sorry to hear that folks are having a hard time with the riseing cost of fuel. I feel deep in my soul that many folks are living past the means. With the cost of gas and utterly stupid high amount of credit folks have now days is going to ruin many people. People are living so far above there means its scary.

    Our goal to to dig in and take care of our small debt load, work on the house and enjoy life!

    I see folks here that bought a $200k home and two each SUV's that they darn well knew they couldnt afford and expect me to now fell sorry for them. I wont feel sorry for them.

    I will stay in my little shack of a house. Pay my bills, drive our Honda's and bank money.

  8. tigerhonaker

    tigerhonaker Platinum Contributor

    Just a few additional comments. The people I work with everyday have not had an increase in pay for now over 4-Yrs. Add to that the every year higher cost of their insurance. Now add to that the growing cost of everything that is shipped by truck. Not done here yet.

    Then the companies get rid of more and more employees every chance they get and the employees that are left get a part of that persons work that they just got rid of.

    Not a good situation at all for the every day working person. I feel Sorry for those that every day go somewhere to work and they have what to look forward to? More-Work and Higher Prices and what? No-Increase in Pay to offset any of it. Pitiful.
  9. Chuck

    Chuck just the messenger

    What Seems to Be Happening

    Most people are whining and using their credit card more at the gas pump. Some might be cutting back on discretionary purchaces. Then they are blaming Bush in the polls for the higher gas prices. While I don't disagree with his role in letting today's situation happen, the general public should also share at least as much of the responsibility. They made their bed when they choose on average to driver wheels that weigh 1000 pounds more than what they drove in the late 1980's with larger tires and grill to suck more gas.

    Granted, some people are getting more fuel efficient vehicles, driving cycles, bikes, etc, but mostly they charge it, go out less, and whine.
  10. dqdave

    dqdave Member

    yep, we are were warned. Most of us "older" citizens remember gas lines, shortages, "high" (for 70's) gas prices. We should take some responsibility.

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