Effect of High Gasoline Prices on Consumers

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Gasoline prices in the U.S. are still linked to global trends, America not having a sensible energy solution, 40 years of neglect on its energy infrastructure, and irrational environmental concerns that continues to plague America in term of job losses (7.6% unemployment rate in a nation filled with natural resources that it cannot utilize) and high energy prices (a shortage of energy refineries and closed off land and sea areas of exploration and development).

This leads to periodic spikes in the price of gasoline. Low-income consumers are hit harder by even a temporary increase in gasoline prices, while all consumers will be affected by a more permanent increase in gasoline prices.

This is because in most parts of the U.S., consumers have no option of cutting down on gasoline consumption as public transportation is not viable for most of them. This means that an increase in gas prices does not reduce the consumption of gas but forces consumers to cut back on discretionary spending, reduce savings, or increase borrowings.

The cut back on discretionary spending can lead to a slowdown of the economy as when consumers have lower amounts for discretionary spending they are more likely to forego the latte or ice cream. This leads to lower sales for these outlets and can also translate into a layoff for some workers or a lower income for others.

This further dampens consumer confidence and the money in the hands of consumers, leading to lower consumption levels and an economic slowdown.

When gas prices rise, the first to feel the hit are the low-income consumers and the workers in retail outlets. If the price hike persists, more sections of the economy are likely to be affected negatively.

In the long-term consumers might shift to smaller cars that offer better mileage, but in the short to mid-term the economy can experience a slowdown and Americans are beyond tired of this.

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