The percentage of household income going to gasoline is near record highs. Not coincidentally, economic growth is much slower than the 4% that economists were predicting 6 months ago.
For the year, the figure is 7.9 percent.
Only twice before have Americans spent this much of their income on gas. In 1981, after the last oil crisis, Americans spent 8.8 percent of household income on gas. In July 2008, when oil price spiked, they spent 10.2 percent.
The figure was 8.9% in April. So consumers are paying more for gasoline than they can sustain. The high oil prices cut consumer spending on other products while also increasing costs to industry. This cuts into economic growth. The US economy currently can't grow at more than a 2% rate. We would need either lower oil prices or a big jump in energy effciency to grow faster than that. Since available net exports of oil are at best flat we need to shift away from oil in order to resume economic growth. I expect that shift to take years and it will come only with deep recessions.
Update: Check out this cool interactive graph of job losses and job growth by sector. Once it comes up (and you probably need Flash enabled to see it) then click on the red line for overall jobs. That will cause a splitting up in many other lines you can hover over to see the details of each sector of the economy. Education and health care have been immune to the recession. Mining and logging recovered quickly and are going gang-busters. There are not enough natural resources in the world with China buying them up and oil companies drilling like mad. Everything else is doing not so good.
|Share |||By Randall Parker at 2011 May 31 03:37 PM Economics Energy|