RSS
Home
Gasoline price increases threaten economic recovery and businesses must adapt
Print
Email
RSS
Subscribe
Gasoline prices in Illinois are rising quickly. The increase is due to a combination of factors including; investor expectations of an economic recovery which is sending money into oil futures, a fall in the dollar against other currencies, refinery issues in the Midwest, and the success by oil producing countries of reducing supply. Add to these market dynamics, a switch over from winter to summer gasoline blends which always increases gasoline prices and then tack on top of that a Federal excise tax of 18.4 cents per gallon, Illinois’ 6.25% sales tax, a 0.003 per gallon tax for an underground storage tank fund, and an additional 12.75 cents per gallon City of Chicago tax and the result is the economy is no longer enjoying cheap gas. Cheap gas has been a silver lining in this recession and has put more money in the pockets of consumers freeing up cash for other consumer items.
This is alarming to watch because as the economy shows signs of stabilizing an upward trend in gasoline prices could severely slow an economic recovery. To compound the issue, oil prices are rising even faster than gasoline prices, already above $70 per barrel it is now a distant memory when it was only $30 per barrel on four months ago. Looking at a worse case scenario, the chairman of the Russian energy group Gazprom is predicting that oil will reach $250 per barrel. If estimates such as this become a reality anytime soon the economic recovery will undoubtedly be delayed until a reliable low-cost energy alternative is introduced. Before this allusive alternative is developed, consumers will be spending less, traveling less, and any economic recovery that has started will slow or cease.
As consumers wait and watch and continue to spend slowly, businesses should develop strategies to help consumers deal with energy challenges not only for today but tomorrow as well. If oil reaches $250 per barrel consumer behavior will change drastically. Even If oil reaches $150 per barrel consumer behavior will change drastically. Any business that develops ways for consumer’s to lower energy consumption and expenses will shine. Whether developing an improved communication systems, more fuel-efficient cars, or methods to reduce travel, businesses need to think through energy pricing while developing and adapting their business plans and strategies.
Gasoline prices rising quickly is a two-sided problem, as gasoline prices rise people have less to spend on other consumer products which means businesses lose money. Businesses have less money because people are not buying their goods or services. We are undoubtedly shackled to oil and gasoline pricing and the more they increase the longer an economic recovery will take. It is critical that businesses adapt to gasoline price increases by developing corporate energy strategies that will lower costs wherever possible. Now is the time for business to lead and adapt not wait and react.
For more info: Read High Gas Prices Could Slow Recovery - http://www.nytimes.com/2009/06/09/business/09gas.html
Related Articles:
Comments
