The United States economy appears to be making a comeback, with several months of private sector job growth and the amount of people filing for unemployment benefits slowly decreasing. Yet, as many Americans read and hear about the economy propping back up from the brink, they are watching gas prices soar. According to AAA, gas prices have risen $.49 cents this year alone, and with North Carolina’s gas tax just over 39 cents per gallon, Tar Heels are strongly feeling the effects of the rising demand for fossil fuels throughout the world.
The political ramifications of increasing gasoline prices are discussed quite often on CNN and other political pundit television shows. In a recent ABC news poll conducted in early March, 65 percent of Americans disapprove of President Obama’s handling of gasoline prices. Many Republicans argue that the administration’s reluctance to fully approve the Keystone pipeline is a good example of the failed energy policies of the Obama administration. Politics aside, there is no doubt that rising gas prices are taking a toll on many Americans, as they are trying to pay-off their debts and revamp their savings account following the Great Recession.
“If it’s not one thing it’s another,” said Travis Tallent, a Macon County resident and graduate student at Western Carolina University. Tallent commutes to graduate school at WCU’s Asheville campus twice a week, and is a part-time intern with the town of Franklin. “I don’t thin k it’s President Obama’s fault to be honest. I don’t think it’s any politician’s fault. I think it has a lot to do with higher demand in China and India and other problems in the Middle East. But to me it’s not easy traveling to Asheville two days a week, trying to do an internship, coaching basketball, and then trying to make ends meet. It’s not easy and I imagine other people are hurting as well,” said Tallent.
Connie Dills is a custodian at Macon County Schools, and gas prices are definitely impacting her budget. “It affects my wallet a whole lot,” Dills said. “I really have to think about how many times to go out and drive because they keep going up,” she said. Dills recently traveled to Winston- Salem and back to visit a family member who is ailing with pancreatic cancer. “It cost about $150 to go there and back. I didn’t have a choice with a sick family member so we had to go. But I’m having to be extra careful here lately to cutback on trips that are not important to us. You consider the price of staying at a hotel on top of high gas prices, then it really hurts my wallet,” she said.
Mark Pledger, a Franklin resident, spoke about the problem as he was putting $20 in his truck last Tuesday afternoon. “It sure doesn’t take too long to put $20 in your car anymore,” said Pledger. “We’ve had to cut back a lot and I’m applying for jobs, which means I have to drive around a lot,” he said. “I don’t blame anyone. I mean what can you do? I’ve cut back a lot, on food and other things, and I’ll have to do that a lot more if they keep going up,” said Pledger.
Consumer spending accounts for a large portion of America’s gross domestic product (GDP) – a barometer economists use to determine how healthy a nation’s economy is. With gas prices soaring of late, consumers may have to cut back their spending elsewhere to offset what they pay at the pump. If one can recall, gas prices were a hot-button issue in the 2008 presidential election. That summer, prices peaked at just over $4 a gallon. When the financial crisis sent the world’s economy in a downward spiral, the issue was quickly forgotten. When the economic collapse lowered consumer demand, gas prices plummeted. In January 2009, the price of a gallon of gasoline cost approximately $1.87.
Brown University economist Julia Hastings published a study last year about how gasoline prices affect consumer spending. Hastings and her co-authors found that consumers usually budget items separately, from groceries, clothes, restaurant purchases, etc. When consumers are forced to pay more for gasoline, Hastings discovered that they usually reduce their spending on groceries, restaurant outings, and other expenditures. In essence, the higher gas prices get, the less money consumers have for other things. “That could really strain an already strained economy,” said Hastings last year upon releasing her study.
The price for a barrel of crude oil remains high, above $100, and it is unlikely we will see a decrease anytime soon, especially with ongoing tensions with Iran. Moreover, gasoline prices tend to peak during the spring and summer months.
The effects it has on local businesses in Franklin is palpable. Jim Parrish, co-owner of Desota Trail Reality and Metal in Franklin, knows firsthand about the impacts of rising gas prices on local businesses. “It can really hurt us,” Parrish said. The local business owner explained that it takes about 8,000 gallons of diesel fuel to fill up some of his trucks. Diesel prices are usually more expensive than regular gasoline, and have already eclipsed $4 a gallon. “You can do the math and see for yourself,” he said. 8,000 gallons will usually last about ten days, Parrish noted.
“Gasoline prices usually cost us about $97,000 a month, and it if goes up another dollar, well I think you can see it effects us. It definitely does and for the most part we have to pass those extra cost on to the consumer,” said Parrish.
Macon County Sheriff Robbie Holland also sees the impacts of high gasoline prices. “We have tried to hold the line everywhere we can, but we can’t control the markets,” said Holland. The Sheriff’s department budgeted $165,000 for gasoline expenses for the 2011/12 fiscal year, and Holland expects to exceed that line-item this year. “It think we will surpass that amount, and we will probably have to ask for more this budget season because of that,” he said. “We can cut back on our out-of town traveling and other expenses, but we have to drive a lot to do our jobs. So there is only so much we can do,” Holland said.
“I think regular is going to catch up in about four to six weeks. It’s going up a little each day; oil companies feel that’s more palatable to the consumer,” said Tom Crosby with AAA Carolinas about the price of regular unleaded gasoline. Crosby mentioned that premium grades were already above $4 a gallon, and regular grade gasoline is sure to be there soon, according to Crosby’s organization.
Average retail gasoline prices in North Carolina have fallen 0.4 cents per gallon last week, averaging $3.74 per gallon as of March 12, 2012. As shown already, gas prices in Franklin are averaging to about $3.85 per gallon this week.
Including the change in gas prices in North Carolina during the past week, prices are about 21.1 cents per gallon higher than the same day one year ago and are 13.7 cents per gallon higher than a month ago. The national average has increased 28.3 cents per gallon during the last month and stands about 22.4 cents per gallon higher than a year ago.
“With a likely peak in gasoline prices still as much as two or more months away, the national average for a gallon of gasoline has already hit the bottom of the range that we projected back in January in our 2012 gasoline price forecast, which is quite concerning,” said GasBuddy.com Senior Petroleum Analyst Patrick DeHaan. “While the recent pace of price increases has slowed somewhat, the spotlight will now shift to refining facilities as they start and finish maintenance- any unexpected problems arising from such may cause prices to resume a quick climb,” DeHaan said.
A U.S. Energy Information Administration reported that a $20 increase in the cost of a barrel of oil will amount to a decrease in about 0.4 points off GDP growth and hikes unemployment by 0.1 percentage points, something that worries economists and lawmakers alike. However, nearly every economist will admit that the President can do little to change gas prices, but almost every politician pretends like they can, especially candidates. Barack Obama criticized President Bush back in 2008, and the Republican Party is doing the same to him now. Meanwhile, local businesses and residents in Western North Carolina continue to struggle.