Gas tanks, budgets running on empty
More Americans caught in a squeeze as fuel prices rise while salaries stagnate
NEW YORK – There’s less money this summer for hotel rooms, surfboards and bathing suits. It’s all going into the gas tank.
High prices at the pump are putting a squeeze on the family budget as the traditional summer driving season begins. For every $10 the typical household earns before taxes, almost a full dollar now goes toward gas, a 40 percent bigger bite than normal.
Households spent an average of $369 on gas last month. In April 2009, they spent just $201. Families now spend more filling up than they spend on cars, clothes or recreation. Last year, they spent less on gasoline than each of those things.
Jeffrey Wayman, of Cape Charles, Va., spent Friday riding his motorcycle to North Carolina’s Outer Banks, a day trip with his wife. They decided to eat snacks in a gas station parking lot rather than buy lunch because rising fuel prices have eaten so much into their budget over the past year that they can’t ride as frequently as they would like.
“We used to do it a lot more, but not as much now,” he said. “You have to cut back when you have a $480 gas bill a month.”
As Memorial Day weekend opens, the nationwide average for a gallon of unleaded is $3.81. In Spokane, the average price Friday was $3.88, about 85 cents a gallon higher than one year ago.
Though prices have drifted lower in recent days, analysts expect average price for 2011 to come in higher than the previous record, $3.25 in 2008. A year ago, gas nationally cost an average of $2.76.
The squeeze is happening at a time when most people aren’t getting raises, even as the economy recovers.
“These increases are not something consumers can shrug off,” says James Hamilton, an economics professor at the University of California, San Diego, who studies gas prices. “It’s a key part of the family budget.”
The ramifications are far-reaching for an economy still struggling to gain momentum two years into a recovery. Economists say the gas squeeze makes people feel poorer than they actually are.
They’re showing it by limiting spending far beyond the gas station. Walmart recently blamed high gas prices for an eighth straight quarter of lower sales in the U.S. Target said gas prices were hurting sales of clothes.
Every 50-cent jump in the cost of gasoline takes $70 billion out of the U.S. economy over the course of a year, Hamilton says. That’s about one half of one percent of gross domestic product.
The Commerce Department reported Friday that consumer spending rose just 0.1 percent in April, excluding the extra money spent on more expensive gas and food, while wages stayed flat for the second straight month.
The tourism industry is bracing for an uncertain summer. AAA predicts the typical family will spend $692 on its vacation, down 14 percent from $809 last year. Many of those surveyed said they are planning shorter trips and expect to pinch pennies when they arrive.
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