Presidents Day just passed and I’m already thinking about the next American holiday, even though it doesn’t come until the end of May. It’s not that I’m especially excited about warmer weather, barbecuing or taking a road trip; Memorial Day is on my mind because it marks the “unofficial” start of summer and with it, peak gas prices for the year.
Normally I look forward to Memorial Day. Like most Americans, I enjoy the three-day weekend that is traditionally accompanied with barbecuing, laying out poolside or making a trip to the beach or lake. For these reasons (used as excuses by oil companies), the weekend we remember our fallen heroes also tends to be the most expensive time of the year for gas prices. And if gas prices are already averaging over $4 a gallon where I live in Southern California ($3.75 nationally), I think I need more time to save up before the “expensive” driving season arrives.
Last year, the average American spent $2,912 on gasoline, a full 4% of their pre-tax incomes. Early predictions of lower gas prices in 2013 seem to be wishful thinking. AAA recently admitted that “market trends and price fluctuations at the pump have been similar to 2011 and 2012.” This could mean that prices will peak in April, or it could mean that prices will continue to get higher and higher, year after year, as they have been doing.
Further, high prices don’t affect everyone equally. It’s been widely reported that high gas prices serve as a “regressive tax” on the poor and working classes, but recently it’s also become evident that different ethnic groups suffer disproportionate hardships as well. A recent report shows that Latinos spend more of their income on gasoline than other Americans. The report articulates exactly how high gas prices hit the Latino community especially hard. Citing among its chief reasons for this phenomenon is that the Latino community suffers from higher unemployment rates, and those that are working may be more likely to occupy “fuel-intensive” jobs such as landscaping or construction work, making them more dependent on gasoline and sensitive to price increases.
With an increasing percentage of our incomes going to pay for our transportation fuel, Americans have less disposable income to spend on other goods. Given that consumer spending is the driving force of our economy, rising gas prices prevent our economy from achieving the healthy growth levels that have eluded us for years (perhaps not so coincidentally, during these same years gas prices have risen to record highs along with oil company profits).
As long as we remain dependent on oil for our transportation fuel needs, the commodity will maintain a monopoly in the market, giving it the pricing power that not only empties our wallets, but stifles our economic growth. Replacement fuels such as ethanol, methanol and natural gas can create a competitive fuel market that could keep fuel prices at $2 a gallon or the equivalent.
What would your Memorial Day plans be if you knew you would only be paying $2 per gallon?+