Originally published by Minority Economic Report.
Speaking at an event yesterday, Tim Geithner, Secretary of the Treasury Department, suggested that the rising price of gasoline will not have a dramatic impact on the economy.
There has been some debate about the intensity of the effect on businesses and normal citizens’ everyday lives; however, to suggest that an increase of 35% in the last year (and 140% since December of 2008) will not have vast economic implications is both misleading and disingenuous.
It is often suggested that average Americans are irrationally and emotionally focused on the price of a gallon of gasoline and far too often use it as a gauge for economic prosperity. So what are the real implications of the rising price of gasoline?
Our emotional infatuation may just be more reasoned than the media and Tim Geithner would like us to know.
When the price of gas increases, especially in the dramatic fashion it has since late 2008, we feel it immediately at the pump. If you have a 20 gallon gas tank, then one fill-up would have cost only $32.40 just two short years ago. The same tank would now cost $77.20 to fill up – and that is just the U.S. Average. Be thankful that you don’t live in New York, Chicago, or LA, (where historically-poorer Hispanics and other Minorities are actually the Majority) or you might be looking at $100 for the same tank.
Not only does that leave all of us with less disposable income, but it also takes those same dollars out of the economy, permanently. Whereas we might have spent our money supporting local businesses in entertainment, clothing, travel, food, etc., now much of that extra money is going to foreign corporations and countries – to the tune of billions of dollars.
Unfortunately, most of us don’t notice the next hit to our wallets: rising food prices. From machinery used to help grow and cultivate crops, to the trucks that transport goods to grocery stores, every product we buy is affected by fuel costs. Very few companies ingest those rising costs, as almost all pass them on in the form of higher prices in the grocery store. It’s not their fault, they have no choice if they want to remain profitable, or in some cases, remain in business.
If you own a small business, your bottom line can fluctuate from month to month in direct correlation to the cost of fuel. Fuel prices will affect your product, shipping, and other transportation costs. Since 99% of all businesses are small businesses, the economic effects are going to be the greatest in this sector.
We hear time and again the blame shifting from one entity to another over why the cost of fuel has risen so dramatically. The administration wants to blame it on speculators. Gasoline producers shift the blame to oil exporters. Oil exporters say it’s America’s fault for limiting the supply by starting wars across the Middle East. Others blame it on the industrialization of Asian countries.
Whatever the reason, we all know one thing: it stings the pocketbook and makes an already difficult economy just that much more complicated. Someone needs to find a way to immediately decrease gasoline prices and they need to do it fast.
Justin Vélez-Hagan is the National Executive Director of The National Puerto Rican Chamber of Commerce, an organization dedicated to supporting the development of Entrepreneurship, Innovation, and Economic Freedom.