By John S. Church
Excerpt from Idaho Statesman
Consumer confidence may be improving and retail sales appear
strong, but rising gasoline prices are putting a drag on economic
Today, most economists do not believe that the current rise
in oil prices will be a serious hurdle for the U.S. economy
or that it could derail the economic recovery.
They state that in general the economy has become less sensitive
to oil prices in the past two decades due to the adoption
of energy-efficient technologies and substitute fuels.
That may be true, but there's no debating the fact that the
U.S. consumer will feel the effects of higher oil prices.
In mid-March, one estimate was that U.S. consumers would
be likely to spend nearly $30 billion more at the pump in
2004, about 15 percent, due to rising gasoline prices.
Today, that estimate could be revised upward to $33-$35 billion.
And while this increase represents a modest amount of total
retail sales in the United States, it has the potential to
weaken our economic growth and recovery.
The simple fact is that when we open our wallet or purse
to pay for that next tank of gasoline, it will take more dollars
than it did just a few months ago.
In the short-run, until I can make some adjustments to my
driving habits or find an alternative means of transportation
that uses less fuel, I will have to readjust my spending away
from other things to pay these higher fuel costs.
And that's what worries retailers, concerns manufacturers
and drives the angst of politicians.
These additional expenditures on gasoline can have the effect
of lessening consumer spending on other goods and services
goods and services that are produced in the U.S. economy
and are creating domestic jobs.
Idaho's economy could be hurt more than those of other states
because the amount of open space and the distances that must
be traveled between communities in the western United States
make gasoline a larger part of our spending picture.
In 2000, the Department of Energy's Energy Information Administration
ranked Idaho 11th in the nation in terms of annual per capita
expenditures for gasoline at $768 11.5 percent higher
than the national average of $689.
It's also true that gasoline prices in Idaho have been higher
than the national average for at least the past four years.
Whatever the price, Idaho citizens and businesses buy a lot
of gasoline. In 2000, according to Energy Information Administration
reports, we used nearly 1.63 million gallons of gasoline per
In 2002, that total reached 1.678 million, and last year
it was nearly 1.758 million gallons.
Total expenditures on gasoline in Idaho may have reached
$751 million in 2003 a $181 million dollar increase
from the year before with higher gasoline prices accounting
for nearly $154 million of that increase.
And things seem to be getting worse.
Even with a reasonable estimate of reduced gasoline consumption
due to the higher prices, the latest round of gasoline price
increases may have captured an additional $20 million of the
budgets of Idaho households and businesses.