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High Gas Prices May Be Squeezing Consumers

By Mark Huffman
ConsumerAffairs.com

May 1, 2007

• Gas Prices Fall for 37 Days • Gas Prices Slide 8 Percent from Record • Gas Prices Creep Down • Oil Price Trend May Be Good News For Consumers • Gasoline Drops Below $3.90 a Gallon • Gas Prices Pull Back Slowly • Oil Prices Fall As Storm Misses Rigs • Latest Gas Price Round-Up • 'Run Your Car On Water' Scheme Could Leave Consumers All Wet • Unregulated Energy Trading Blamed for Much of Gas Price Gusher • Airlines Join Effort To Limit Oil Speculators • Questions Raised about MyGallons.com • 'Hypermiling' Is Dangerous, Says AAA • Struggling Drivers Blame Washington for High Gas Prices • What’s Really Fueling Those Sky-High Oil Prices • Credit Card Fees at the Pump are a 'Hidden Tax' on Consumers • Survey: 3 Out of 4 Angry About High Gas Prices • $2 A Gallon Gas Possible, Analysts Tell Congress • Speculators Buy More Oil Contracts Than Oil Companies • Saudis to Pump More Oil • Limiting Oil Speculators Gains Ground • Congress To Probe Oil Price Spike • Oil Market 'Saturated,' Iran Claims • Feds See No Relief from High Gas Prices • High Gas Prices Could Mean Lower Insurance Rates • High Gas Prices Good For Kia, Honda • Gas Prices Rip Past $4 and Keep Climbing • Administration, OPEC See Different Causes Of Oil Surge • Feds Probing Possible Oil Market Manipulation • Beware of Fuel Sippers Sipping High-Test • Retailers Respond to High Gas Prices with Discounts, Promotions • Rushing Into a Smaller Car Too Soon May Not Save Money • Hybrid Sales and Prices Climb in Lockstep with Gas Prices • Truckers Bemoan Burden of High Diesel Costs • Gas Prices Biting into Worker Productivity • Consumers Warned About Gas-Saving Schemes • Is Tony Soprano Controlling Gas Prices? • Oil & Gas: The New Bubble • Critics: New Federal Gas Mileage Standard Falls Short • Consumers Feeling Pain of Skyrocketing Gas Prices • New Gas Price Record Forecasts Expensive Summer Driving Season --- • More ...

On the surface, signs point to a still-robust economy, but a closer reading of statistics may be grounds for a little anxiety. One economist fears rising gasoline prices could be the wildcard that spoils the party for consumers.

“People spent more in March but may be enjoying it less as the rising price of energy is cutting into what they actually take home,” said economist Joel Naroff of Naroff Economic Advisors in Philadelphia.

Reacting to government statistics showing consumers both made and spent more money in March, Naroff said he sees signs that high fuel costs are already causing consumers to curtail discretionary spending.

A closer reading of the numbers, he says, shows the only thing consumers bought more of in March was “non-durable” goods – in this case, mostly gasoline.

“Rising energy prices is the major factor behind that increase and after we adjust for inflation, we actually carted home fewer goods,” Naroff said. “Basically, the strong gains in income are being greatly eroded by the rising prices.”

What’s happening, says Naroff, is a disconnect between Federal Reserve policy makers and consumers. On one hand, the Fed looks at the numbers and decides inflation is pretty much under control. But consumers look at their fuel bill and decide to spend less on other things.

“On the inflation front, if you are a consumer, things are not good,” he said.

With few signs that oil prices will go down soon, Naroff believes consumers could feel pinched throughout the summer.

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