The Working Class pay up to 8 times more to fill up; Economy could feel sting

[NDN]

Gas prices hit working class
Study says lower income people effectively pay 8 times more to fill up; broader economy could feel sting.

By Steve Hargreaves, CNNMoney.com staff writer
November 14 2007: 7:02 AM EST

NEW YORK (CNNMoney.com) --

Lower-income Americans spend eight times more of their disposable income on gasoline than wealthier residents do.

The disparity is dramatic. In Wilcox, Ala., people spend 12.72 percent of their income to fuel one vehicle, according to a new study from the Oil Price Information Service (OPIS). In Hunterdon County, N.J., people spend 1.52 percent.

The study illustrates the impact rising oil prices are having on people's budgets. Many economists have downplayed the effect gasoline prices will have on consumer spending. But with prices now pushing above $3 and studies like this, some say the economy may take a hit.

"It's stinging less in some areas than it is in others," said Fred Rozell, retail pricing director at OPIS, an energy research firm. "It's tough out there for a lot of people."

The most painful places to fill up were in Alabama, Mississippi or Kentucky. In each case residents there pay more than 11 percent of their income to fuel their car.

The five counties where resident are having the easiest time are in either New York or New Jersey. In both states, residents spent less than 2 percent of their income on gasoline, although that by no means suggests everyone there is so well off.

Income is obviously a big factor in the difference. In Wilcox, the median household income in 2004 was $19,682, according to the Census Bureau. That means half the people earn more than that amount, and half earn less. In Hunterdon County, median income was $87,701.

"When I looked at this, I said, 'How do people live on $17,000 a year,'" said Rozell.

Rozell said another big factor in the gap was the amount people drive. In Alabama, the average person drives 13,000 miles a year. In New York and New Jersey, the average yearly commute was just 8,374 miles, thanks largely to better public transportation.

And gas prices also play a role. New Jersey, with its multiple refineries and low state taxes, often has the cheapest gas in the nation. As of Tuesday, the average for a gallon of regular in the Garden State went for $2.905. In Alabama it was $3.026.

The study shows that the amount people spend on gasoline as a percentage of their income has about doubled since 2002. In that period, gas prices have tripled and oil prices have soared nearly five-fold. Nationally, Americans spend 3.8 percent of their income fueling one vehicle, versus 1.9 percent in 2002.

Saving money at the pump
The study may seem to contradict other reports that say Americans spend proportionally less of their income on gas than they used to. The OPIS study uses 2002 as its starting point, a time when gasoline prices were relatively cheap at just more than $1 a gallon and wages were fairly high following the go-go 1990s. Since that time, wages have been fairly static while gas prices have soared.

Other studies have said it's relatively cheaper for Americans to drive now than it was in the early 1980s.

In 1980, the average American had to work 105 minutes to buy enough gas to drive the average car 100 miles, according to a study by David Wyss, chief economist at Standard & Poor's. By 2006, the average American needed to work only 52 minutes, thanks in part to better fuel efficiency but mostly due to higher wages.

Still, economists will be looking at the numbers closer to 2002 when trying to figure out if these high gas prices are going to crimp consumer spending, which accounts for over two-thirds of the nation's economic growth.

Whether consumer spending has been hit is still an open question. Over the last few months, auto sales are down and retail sales have been mixed. But experts point to the credit crunch and troubled real estate market, saying it's hard to pin consumer spending problems on rising energy costs alone.

Past gasoline spikes above $3 a gallon have usually amounted to short blips prompted by a major event, such as the Lebanon and Israeli war or Hurricane Katrina. With national average gas prices now over $3 in a time of year that is usually a period of low gas demand and prices, some experts say the economy could feel the sting.

"We're going to see the consumer pull back a bit in the fourth quarter," said Jim Glassman, a senior economist at J.P. Morgan. "When you have to pay these bills, there's just not as much left over." 

[Undisguised Sockpuppet]

I saw this coming. Can you say gradual meltdown? When the stockmarket crash happens late in this decade or early in the next decade things will already be in full meltdown.

[MODU]

A study that states the obvious.  I'm impressed.

[Undisguised Sockpuppet]

I wonder how long till the oil companies come out and claim that's good for growth?

[opebo]

A study that states the obvious.  I'm impressed.

The obvious part - which you seem reluctant to accept - is that the american system forces a large proportion of the population into desperate poverty and insecurity.

Can you imagine?  11% of your income on fuel?  Jesus american working class incomes are practically nothing!

[MODU]

A study that states the obvious.  I'm impressed.

The obvious part - which you seem reluctant to accept - is that the american system forces a large proportion of the population into desperate poverty and insecurity.

I thought you said we were already poor.  You mean we aren't yet? 

[Silent Hunter]

Not a lot you can do about that outside of major (and probably involuntary) wealth redistribution. You can't exactly ask someone their salary every time they fill up with gas.

[2952-0-0]

Methinks in the next decade or so driving to work will become something only the rich can do. It would become a great shock for all those generations who have worked for the car.

[opebo]

A study that states the obvious.  I'm impressed.

The obvious part - which you seem reluctant to accept - is that the american system forces a large proportion of the population into desperate poverty and insecurity.

I thought you said we were already poor.  You mean we aren't yet? 

Your statement makes no sense, MODU.  Who are the 'we' that you refer to?  As for the tense of poverty, I do not see where in my post I refer to it not being past.

[MODU]

Methinks in the next decade or so driving to work will become something only the rich can do. It would become a great shock for all those generations who have worked for the car.

Eh, probably not.  Similar things were said back in the 70s, just to see automobile sales soar in the 80s.  What will happen (what is happening) is a change in the way our vehicles are powered.  In the 80s, we switched to lighter car bodies with more efficient engines.  Now we're switching to cars that are smarter, which can tell the engine to alternate with a power cell or other cars that consume multiple types of liquid fuel, so the driver can go with the cheapest form available wherever they are currently located. 

However, as far as driving to work goes, the one true saving grace (which helps in many ways) is the growing trend of working from home.  The employee saves money by not driving while the company saves money by not having to have a larger facility for all their workers.  This in turn lightens the traffic load on the highways, meaning cars can travel faster at a more optimum speed for maximum fuel efficiency.  This also decreases the amount of exhaust created, meaning the air isn't as dirty.  Unfortunately, telecommuting still isn't widely available in all markets, so we have yet to see its full potential.

[○∙◄☻¥tπ[╪AV┼cVê└]

The problem is basically that politicians who don't try to actually improve the future haven't spent the money on R&D for a new energy system, a new transportation system, and so on. The federal government has been grossly negligent since 1981.

[John Dibble]

The problem is basically that politicians who don't try to actually improve the future haven't spent the money on R&D for a new energy system, a new transportation system, and so on. The federal government has been grossly negligent since 1981.

I'm pretty sure they've been negligent since long before then.

[Lief 🗽]

Eventually, won't the increased price of gas increase the price of other goods as well? Food, for one, needs to shipped many miles from the farm to the supermarket where consumers buy it. If gas prices continue to rise, won't the prices of food in turn rise? And then the clothes we import from China, India, etc. need to be flown over here, which again needs gas.

[Undisguised Sockpuppet]

Eventually, won't the increased price of gas increase the price of other goods as well? Food, for one, needs to shipped many miles from the farm to the supermarket where consumers buy it. If gas prices continue to rise, won't the prices of food in turn rise? And then the clothes we import from China, India, etc. need to be flown over here, which again needs gas.

Leif, We're already seeing that happen with food prices. Look at how the price of foods has jumped quite a bit this year. it started with milk prices. I suspect we'll start seeing jumps in clothing prices late this year and if not then next year. Welcome to the peak.

[David S]

Actually the poor pay the same price per gallon as the rich. They spend a larger portion of their income on gas because their income is smaller. Of course the same is true of food, clothes etc. As far as I know, no one asks you how much you earn before they charge you for anything.

[Ban my account ffs!]

Actually the poor pay the same price per gallon as the rich. They spend a larger portion of their income on gas because their income is smaller. Of course the same is true of food, clothes etc. As far as I know, no one asks you how much you earn before they charge you for anything.

Why do you state the obvious as if you are teaching it to us for the first time in our lives?

I think what you said is obvious but doesn't address the point of the thread one bit.

Gas price hikes disproportionately affect the poor.  On top of that, "libertarians" would take away benefits that help the poor get by and on top of that, they would prefer a tax structure that shifts the biggest burden to the poor.

[Undisguised Sockpuppet]

Actually the poor pay the same price per gallon as the rich. They spend a larger portion of their income on gas because their income is smaller. Of course the same is true of food, clothes etc. As far as I know, no one asks you how much you earn before they charge you for anything.

Dude the article said in terms of percentage of their income. Nothing about prices being adjusted for them.

[David S]

Actually the poor pay the same price per gallon as the rich. They spend a larger portion of their income on gas because their income is smaller. Of course the same is true of food, clothes etc. As far as I know, no one asks you how much you earn before they charge you for anything.

Dude the article said in terms of percentage of their income. Nothing about prices being adjusted for them.

Thread title "Working class pay up to 8 times more to fill up."

[Ebowed]

Thread title "Working class pay up to 8 times more to fill up."

Read the article.  Damn, that comment was dumb.  And not at all surprising either.  Everyone knows that the poor and rich pay the same price per gallon.  That's obviously not the issue.

Then again, getting through to someone who supports a flat tax is sort of like convincing a creationist that they don't need their appendix.

[David S]

Thread title "Working class pay up to 8 times more to fill up."

Read the article.  Damn, that comment was dumb.  And not at all surprising either.  Everyone knows that the poor and rich pay the same price per gallon.  That's obviously not the issue.

Then again, getting through to someone who supports a flat tax is sort of like convincing a creationist that they don't need their appendix.

If you can't make an argument based on facts without name calling maybe you ought to go sit it out for a while.

I did read the article and I know what it said, but the title was designed to evoke the thought that those damn rich people are abusing the poors again. Damn capitalism! Maybe you've been reading too much Opebo.

The situation will always be this way. The poor will spend a greater portion of their income on necessities. How would you prefer it to be, financial equality for everyone? Every communist country promoted that same idea and look how it worked out for them. Where is the shining example of a success story in communism; the former USSR? China? Cuba? N Korea? The people were all poor and lived in tyranny.

[Ban my account ffs!]

Thread title "Working class pay up to 8 times more to fill up."

Read the article.  Damn, that comment was dumb.  And not at all surprising either.  Everyone knows that the poor and rich pay the same price per gallon.  That's obviously not the issue.

Then again, getting through to someone who supports a flat tax is sort of like convincing a creationist that they don't need their appendix.

If you can't make an argument based on facts without name calling maybe you ought to go sit it out for a while.

I did read the article and I know what it said, but the title was designed to evoke the thought that those damn rich people are abusing the poors again. Damn capitalism! Maybe you've been reading too much Opebo.

The situation will always be this way. The poor will spend a greater portion of their income on necessities. How would you prefer it to be, financial equality for everyone? Every communist country promoted that same idea and look how it worked out for them. Where is the shining example of a success story in communism; the former USSR? China? Cuba? N Korea? The people were all poor and lived in tyranny.

You're comparing apples and oranges, David.

There are plenty of examples of countries that have modified capitalism to include elements of socialism that has led to an improvement in the quality of life for the masses.

Sweden and Germany strike me as two countries that, despite some obvious problems, have done quite well with such a model.

So, in the spirit of your posts on this thread, David:

Name an example of a nation that has followed 100% free-market capitalism that has been a success story.  Name ONE, and I'll shut up.

[Storebought]

Why do the media act as if this is a shock, or, even worse, an outrage?

Comparatively expensive gasoline for the lower 'classes' (i.e., wage earners) has been government policy for decades, at least since the early 1970s. Federal and state taxes, not including any local taxes, comprise about 25% of the price paid at the pump.

[opebo]

I think the main point of the article was that the working class were so close to the breaking point before that this is the nail in the coffin.  The comparison with the owners is simply to point out that gas prices mean almost nothing to them due to their privilege.

[DownWithTheLeft]

I first thought this was one of those crazy conspiracy arguments that Republicans were driving up gas prices in the ghetto, after reading the article it makes sense.  Obviously if you have less 1/8 the amount of money of someone, paying the same price for gas is 8X as high.  How was this hard to figure out?

[Undisguised Sockpuppet]

I first thought this was one of those crazy conspiracy arguments that Republicans were driving up gas prices in the ghetto, after reading the article it makes sense.  Obviously if you have less 1/8 the amount of money of someone, paying the same price for gas is 8X as high.  How was this hard to figure out?

It's not.