Oil Prices: The Economic Consequences

Higher prices means a decrease in demand, and consumers who are already experiencing difficulty paying for basic goods and are even less apt to buy luxury items. Consumers are more likely to cut things out of their budget, and look for lower-priced items when shopping for necessities. Already, I find myself buying generic goods, looking for food on sale, and putting off replacing clothing and shoes with new items. Some people are even giving up beef, not for ethical reasons, but because it is lower in price than chicken and vegetables substitutes (Krauss 2008, p.1).

Not all industries are suffering because of higher fuel prices. Of course the oil and gas companies themselves are flourishing. Also, while the local middle-level chain restaurants in my town appear to be patronized less than they were, discount department stores seem to be doing well, as consumers can get all of their shopping done in one store, minimizing gas usage, and also look for bargains.

I realize that I am lucky to live in an area of the country that is not suffering as much as some other regions. Not all regions of the U.S. are equally affected — urban dwellers with access to public transportation and for whom car-pooling is more feasible are less cash-strapped than residents of extremely remote, rural areas dependent upon agricultural production. “Across broad swaths of the South, Southwest and the upper Great Plains, the combination of low incomes, high gas prices and heavy dependence on pickup trucks and vans is putting an even tighter.

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