as price goes up, global consumption will go down, and at some point, they should start losing money...
Posted on 02/21/2012 5:40:44 PM PST by blam
Can Americans Handle $150 Oil?
February 21, 2012
Douglas A. McIntyre
The International Energy Agency said Europe could “cope” with a supply shortage brought on by a drop in imports of crude from Iran, but that prices might temporarily reach near the $147 a barrel peak of 2008. The chief of large energy firm Vitol told the Financial Times that crude could reach and stay at $150. It is not entirely possible to determine what oil at $140 or $150 would do to the average American household budget, but a look at Census data suggests that the effects would be harsh.
The Consumer Expenditure Survey done in 2010 showed that the average consumer unit spent $49,067 in 2009. That unit:
includes families, single persons living alone or sharing a household with others but who are financially independent, or two or more persons living together who share expenses.
The budget for these households was very tight. More than $10,000 went to shelter. Another $6,400 went to food. Over $3,100 went to health care. Another $5,500 went to pensions and Social Security. More than $2,700 went to vehicle purchases.
The Census data showed that in 2009, a consumer unit spent more than $3,600 on utilities, which included heating. Another $2,700 was spent on gas and motor oil.
Crude prices averaged approximately $90 a barrel last year, and in late summer they were below $80. Oil prices at $120 would be a 50% rise from the amount around Labor Day. At $150, the figure is nearly double.
What Americans spend on gas, oil and home heating oil varies widely from place to place and family to family. Urban dwellers may not own cars. Commuters in some places have 50 mile round trips to and from work. People who live in cities are more likely to weather high gas prices than others. But for those others, gas prices at or above $4 a gallon could be catastrophic. For people who drive a car that gets 25 miles per gallon, the cost of a medium length commute could increase by several hundred or even more than $1,000 this year. The government data on consumer spending shows that amount would be a burden, and other items these households buy might not be affordable at all. The Census data shows that entertainment expenditures are $2,700 a year. Apparel is just over $1,700. And food consumed outside the home was just over $2,600. Each of these activities is essential to consumer spending activity, which remains about two-thirds of gross domestic product.
Economists remain worried about what high fuel prices will do to GDP. It is really not that hard to tell. The typical American household budget is not terribly elastic, and consumer spending is about the only area where it has flexibility if energy prices jump.
Right you are, Captain.
Four bucks is the threshold.
At five bucks, even another guy named Bush could get elected (not that I’m suggesting that).
After the next four years, I am very afraid we will be looking back on $5 gasoline quite fondly.
You clearly don’t understand what happens to the entire economy when Americans “adjust their budgets” and “cut back” where they have to. Those “adjustments” and “cut backs” are purchases that are not made to businesses that start to close down and lay more people off.
Meanwhile, inflation is rampant because everything gets much more expensive so we have the perfect storm of fewer people working and food and clothing and heat/cooling costing more.
This is not about “toughness” or “being able to handle it” - it’s about economic reality and no, our economy “cannot handle” 150 dollar oil - which would be probably 5 dollar gas - and it’s not got a damned thing to do with Americans versus Dims or toughness or macho.
It’s economics 101. Live it love it learn it.
as price goes up, global consumption will go down, and at some point, they should start losing money...
The folks who are in the most trouble not only think the Dems are the ones dialed in to this, they'll vote for them in droves. I damn near give up.
what all the comments don’t understand is the dynamism of the USA system. Once the commie in chief is gone and the democonnies and rino’s are fighting to retain power, the government barriers to the exploitation of our carbon will abruptly end. The only real question is how anti-american will the new political class be.
And the sad part is that very few consumers will ever consider how this all came about. They don’t seem to understand how political acts influence gasoline prices.
Folks here clamoring for 8 bucks a gallon gas or 200 bucks bbl oil are in for a shock at how quickly this country will tail spin (and how quickly our strategic reserve is DRAINED).
Buckle up, things you hold near and dear are about to become a WHOLE lot more expensive.
I hope I’m wrong, but the question may end up being “Are Americans going to have any other choice BUT to deal with $150 oil?”
Sigh. November can’t get here soon enough.
Why?
We aren't using as much....
I work in an industry that services all types of businesses. We have been weathering the storm fairly well except for the last month, particularly the past two weeks. This is the price range in which, I believe, it all starts to break down. I don’t think we (the country) can withstand these prices very long, $5 will break us.
Obama will certainly try to blame, evil oil companies and Bush. The press will repeat it. Then if the economy is sputtering even more than now, the American people will vote him out of office.
He wants to win. He is not going to just give up. But he is going to lose the election.
“Its not just gasoline were talking about here”
Absolutely. Kerosene, diesel, LPG gas, the base chemicals for most crop pesticides/insecticides/fungicides, plastic soda bottles, road asphalt, the list goes on and on. We’re going to get hit from every angle if petroleum prices soar and stay there for any length of time.
If the price of oil keeps going up like this, soon gasoline will cost nearly as much as Governor Perry’s wonderful toll roads.
You hit it right there. Hopefully we can keep putting THAT message out “there” and try to make folks understand. “Wanting” high oil prices is gonna kill us quick.
Our Directv was gone three years ago.
Moved onto Netflix. Started watching Gaki no Tsukai from Japanese tv free on the internet Dad hooked up to the TV.
It’s not so bad. We watch lots of DVDs too. Oh and Pinterest on my computer. That site is too addictive. Tons of projects for summer. And food too. Yum.
A farmer friend of mine told me that by Christmas of 2012 we will not be worried about presents under the tree. We will be too worried about buying food for the table.
>as price goes up, global consumption will go down, and at some point, they should start losing money...
Unless, as has been suggested, it’s a result of the dollar devaluing. (i.e. Maybe the oil is staying the same real-price and our imaginary-dollars are simply being valued less.)
Comrade, you won't have $5 or gasoline to look back at. You'll be standing in a brealine with the rest of us on a cold winters day begging for your daily sustinence, just as Dear Leader Obama wants it.
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