The average price for a gallon of regular gasoline nationwide has jumped above $5. That is up from just above $3 a year ago. Economists increasingly say many Americans cannot afford higher prices. Yet, what is the real effect of the rise?
American cars have gas tanks that range in size from 14 to 28 gallons. The price of a tank of gas is up $40 in a year if the tank is 20 gallons. Any American who uses five tanks of gas in a month pays $200 more. American families have a median household income of about $67,000, or roughly $45,000 after taxes. That, in turn, is approximately $3,600 a month. Once mortgage, food and clothing costs are backed out, the extra $200 a month for gas has to be meaningful for these families. For families in lower tiers of income, the extra cost is crippling.
If gas prices were the only major component of daily living that has risen sharply, the increase in gas prices might be tolerable. However, the consumer price index indicates that prices of many foods have risen over 10% year over year. That could be another several hundred dollars in extra costs. The weight of the burden of inflation rises quickly.
A primary concern of everyone from economists to tens of millions of people struggling with high prices is how much money will they have to spend beyond the essentials. Much of that will be answered when the holiday season approaches. That time may seem far off, but October is just more than four months away. The retail industry is a pillar of employment in America. A difficult fourth quarter would jeopardize hundreds of thousands of jobs.
An increased cost of filling a 20-gallon tank may seem trivial. Taken in a broader context, it is not.
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