Gasoline prices rise to dangerous level
Just a few weeks ago I had written about the rapidly rising energy prices and how these could derail the US economy. The recent surge in oil prices has already crossed the high end the iProceed.com estimate. As the chart below from AAA.com shows, the prices have reached a point where they could impact consumer spending.
To make matters, for good reasons though, the Fed has been raising interest rates. While this will keep inflation under control by curbing consumer spending, it will also mean that as businesses get ready for fall and holiday shopping seasons, strategists have enough reasons to get worried.
According to the Federal Highway Administration, a typical American household spends about 20% of its income on driving costs. When we tried to estimate just the gasoline cost we came up with $2,500 (15,000 miles driven, average MPG of 25, with an average gasoline price of $2.50). In other words, consumers definitely have lower disposable incomes than they did in 2000 when gas prices were half.
So what does it mean for you?
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Watch the gas prices very closely. Stay on top of your business fundamentals and change your strategy.
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High energy prices may mean some good news for online retailers. When consumers do not want to get out of their homes to shop, they might opt for online shopping, provided shipping is free or relatively low.
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Higher gas prices affect every aspect of the economy. When we do not get into our cars, we do not buy all those mochas either.
Recommended article: Impact of interest rate hikes on businesses
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